When you have a home equity line of credit (HELOC), you might wonder whether it will complicate the sales process. Can you sell a house with a HELOC at all? While it is possible to sell a house with an outstanding balance, it can be challenging. A “we buy houses in Memphis” company can speed up and simplify the process.
Understanding How a HELOC Works
A HELOC is a secured line of credit that homeowners can use to borrow against the equity they have in their homes. This works more like a credit card than a mortgage, as you can use it as needed. It is a variable repayment period, based on the amount of the credit line you’re using.
You do have to apply for the HELOC with a lender. If you already have a mortgage on the house, the amount available for your HELOC will be lower than if you don’t have a mortgage.
When You Have To Settle the HELOC Balance
After selling the house, you’ll receive a check for whatever home equity you had built up in the property as part of the sale proceeds. However, you’ll need to pay the closing costs out of the proceeds.
If you have any loans that use the house as collateral, the payoff of these amounts is deducted, too. For example, the amount of any mortgage lien or HELOC balance you have at the time of the sale is subtracted from the proceeds. Can you sell a house with a HELOC if you also have a primary mortgage? The primary mortgage receives proceeds first, followed by the lender who offered the HELOC.
If you don’t have enough sale proceeds to cover your loan balances, you’d have to settle the extra amount separately with the lenders.
Some HELOCs Have a Prepayment Penalty
Some lenders will charge you a HELOC prepayment penalty if you repay it faster than expected. If you repay the full amount within a few months of borrowing it, for example, the penalty could be a percentage of the amount you borrowed.
Why Consider an As-Is Home Buyer When You Have a HELOC
When placing your home on the market while you have an existing balance on your HELOC, you must continue making the required HELOC payments until the house sells. If it takes several months to sell the house, your HELOC payments could be significant. If you contact an as-is home buyer and close on the house faster, you’ll have fewer HELOC payments to make.
Count on Pyramid Properties To Buy Homes in Any Condition With an Expedited Timeline
So, can you sell a house with a HELOC? You can, but the outstanding loan balance comes directly out of the proceeds. When selling a house with a lien, you may want to speed up the process to avoid making extra interest payments.
If you’re worried that managing the HELOC payoff at closing will be confusing, Pyramid Properties can walk you through the process. Call Alan with Pyramid Properties today at (901) 504-5555 for a no-obligation cash offer for your home.