HELOC When Selling Home: What Happens and Your Options Explained
May 14, 2023
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A home equity line of credit, or HELOC, is a popular way for homeowners to tap into the equity they've built up in their homes. However, if you're planning on selling your home, you may be wondering what happens to your HELOC.
In this article, we'll explore everything you need to know about HELOCs when selling your home, including how they work, what happens when you sell your home, and what your options are.
What is a HELOC?
A HELOC is a type of loan that allows you to borrow money against the equity you've built up in your home. It works like a credit card in that you have a revolving line of credit that you can draw from as needed, and you only pay interest on the amount you borrow.
HELOCs typically have a draw period of 10 years, during which time you can withdraw funds as needed. After the draw period ends, you enter a repayment period, during which time you must pay back the principal plus interest.
What happens to your HELOC when you sell your home?
When you sell your home, your HELOC will need to be paid off just like your mortgage. The proceeds from the sale of your home will first go toward paying off any outstanding mortgage balance, and then toward paying off your HELOC.
If the sale of your home does not generate enough proceeds to pay off both your mortgage and your HELOC, you will be responsible for paying the remaining balance out of pocket.
What are your options?
If you're planning on selling your home and you have a HELOC, you have a few options to consider:
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1. Pay off your HELOC before you sell your home: If you have the funds available, paying off your HELOC before you sell your home is the simplest option. This will ensure that you don't have to worry about the HELOC balance when you sell your home.
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2. Use the proceeds from the sale of your home to pay off your HELOC: If you don't have the funds available to pay off your HELOC before you sell your home, you can use the proceeds from the sale to pay it off. However, if the sale of your home does not generate enough proceeds to pay off your HELOC, you will be responsible for paying the remaining balance out of pocket.
3. Transfer your HELOC to your new home: If you're planning on buying a new home, you may be able to transfer your HELOC to your new home. This can be a good option if you have a low interest rate on your HELOC and you don't want to lose it.
Conclusion
In summary, if you have a HELOC and you're planning on selling your home, you'll need to pay off your HELOC just like your mortgage. You have a few options to consider, including paying off your HELOC before you sell your home, using the proceeds from the sale to pay off your HELOC, or transferring your HELOC to your new home. By understanding your options, you can make an informed decision that's right for your financial situation.
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Ready to unlock the value in your home and make smart financial decisions? Get a quote from Hitch today and experience the benefits of our digital HELOC platform. Our streamlined process, personalized approach, and commitment to your financial health make us the ideal choice for your home equity needs. Don't wait, take control of your finances with Hitch!
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Hitch, Inc. NMLS #2383367 #2383367
2158 NW Toussaint Drive. Bend, Oregon 97703
1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.
2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs.The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.
3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Most borrowers get their cash on average in 21 days. The time period calculation to get cash is based on the first 4 months of 2024 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances.
4. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend.
5. The content provided is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply.