When selling a home, is a home equity credit line treated as a second mortgage or is a line a credit ?
Can I sell a home with just a 1st mortgage, collect the equity and continue to pay on my Heloc as if it is a line of credit? or will I have to include it in my home sale (and possibly a short sale)?
One Response
efflandt
09 Mar 2010
The HELOC is secured by your home (read your loan documents). It likely has a due on transfer clause which means that if you transfer your ownership of the property, the loan becomes immediately due and payable. Typically that means you need to pay off the HELOC with proceeds from the sale (or you need to bring enough cash to settle it at closing).
Anyone with any sense would not buy the property with an outstanding lien for the HELOC, because if that is not paid, that lender could still foreclose (that lien would be senior to any sale or transfer you make now).