Can You Sell Your House if You Have a HELOC?

Selling a home with an active Home Equity Line of Credit (HELOC) is possible. Like a primary mortgage, the HELOC represents a lien against the property and must be addressed during the sale. The process involves coordinating with your lender and the closing agent to ensure the outstanding balance is satisfied from the sale proceeds. This ensures a clear title can be transferred to the new owner.

Understanding the HELOC’s Impact

A Home Equity Line of Credit is a secured debt, directly tied to your home’s value. This makes it a lien, similar to your primary mortgage, which grants the lender a legal claim to your property until the debt is repaid. When a property changes ownership, all existing liens, including a HELOC, must be satisfied to provide the buyer with a clear title.

The outstanding balance of your HELOC directly reduces the net proceeds you receive from the home sale. For example, if you sell your home for $400,000 with a $100,000 primary mortgage and a $50,000 HELOC, both debts would be paid from the sale funds, leaving $250,000 before other closing costs. Buyers do not assume an existing HELOC; it is settled as part of the closing process. This ensures the new owner acquires the property free of previous debt obligations.

Preparing for Your Home Sale

A key step in preparing to sell your home with a HELOC involves obtaining an accurate payoff statement from your HELOC lender. This document details the precise amount required to satisfy the debt, including accrued interest and potential fees. The payoff amount is not simply your last statement balance, as interest accrues daily.

To request a payoff statement, contact your HELOC lender directly. Lenders require personal information, such as your name, account number, property address, and the desired payoff date. It is advisable to request a payoff statement with a “good through” date that extends beyond your anticipated closing date, allowing for potential delays. Understanding this payoff amount in relation to your anticipated sale price and remaining primary mortgage balance is important for estimating your net proceeds and planning your finances.

Executing the HELOC Payoff at Closing

At the closing of your home sale, the title company or closing attorney plays a central role in facilitating the HELOC payoff. They receive the sale proceeds and are responsible for disbursing funds to all lienholders, including your HELOC lender. The exact payoff amount is sent directly to the HELOC lender from the sale funds.

Once the HELOC lender receives the full payoff amount, the account is closed, and the lien on your property is released. This release involves the lender submitting documentation to the appropriate recording office, clearing the title for the new homeowner. Merely paying down the balance to zero does not automatically close the HELOC; a specific request to close the account and release the lien is required.

In situations where the sale proceeds are insufficient to cover the HELOC balance, along with the primary mortgage and other closing costs, the seller is responsible for bringing additional funds to closing. This scenario necessitates the seller making up the difference to ensure all liens are cleared and the sale can be finalized.