How to Sell a House with a Home Equity Loan in Newton, NC

You took out a home equity loan or HELOC a few years ago for home improvements, debt consolidation, or college tuition. Now you need to sell your Newton home, and you're wondering: How does this second mortgage affect the sale? Can you even sell? What happens to the equity line?

Having a home equity loan doesn't prevent you from selling—you just need to understand how it works and what you'll net after both mortgages are paid off. Let me explain the process.

Understanding Home Equity Loans and HELOCs

Home Equity Loan:

• Fixed loan amount
• Fixed interest rate
• Fixed monthly payment
• Second mortgage on property

HELOC (Home Equity Line of Credit):

• Revolving credit line
• Variable interest rate
• Draw period (use funds) then repayment period
• Also secured by your property

Both Create a Second Lien: Your property has two mortgages—your primary mortgage and the equity loan/line.

How Second Mortgages Affect Your Sale

Payoff Order at Closing

First Priority: First mortgage paid off Second Priority: Second mortgage/HELOC paid off Third Priority: Closing costs paid Finally: Remaining proceeds to you

Example:

• Sale price: $220,000
• First mortgage: $140,000
• Home equity loan: $30,000
• Closing costs: $15,000
• Your net proceeds: $35,000

Required Payoff

Both Loans Must Be Paid: Can't sell property with liens remaining (except in short sale)

Title Won't Transfer: Until all liens released

Lenders Coordinate: Title company handles payoff to both lenders

Calculating Your Net Proceeds

Formula:

Sale Price
- First Mortgage Payoff
- Second Mortgage/HELOC Payoff
- Closing Costs (6-10%)
= Your Net Proceeds

Newton Example:

$200,000 (sale price)
-$130,000 (first mortgage)
-$25,000 (HELOC balance)
-$14,000 (closing costs)
= $31,000 Your Net Proceeds

What If You Don't Have Enough Equity?

Problem: Combined mortgage balances plus closing costs exceed sale price

Example:

• Sale price: $185,000
• First mortgage: $140,000
• HELOC: $35,000
• Closing costs: $13,000
• Total needed: $188,000
• Shortfall: $3,000

Options:

1. Bring $3,000 to closing from savings
2. Negotiate short sale with lenders
3. Wait and build more equity
4. Sell to cash buyer (lower closing costs)

The Selling Process with a HELOC

Step 1: Get Payoff Quotes

Contact Both Lenders: Request payoff statements

• Primary mortgage lender
• HELOC lender (often same bank)

Payoff Amount Includes:

• Current principal balance
• Accrued interest to closing date
• Any fees or charges

Get Updated Payoff: Close to closing date (interest accrues daily)

Step 2: Calculate Your Net

Use Payoff Amounts: Calculate what you'll walk away with

Include All Costs:

• Both mortgage payoffs
• Real estate commissions (typically 6%)
• Closing costs (2-3%)
• Prorated taxes
• Other fees

Step 3: List and Sell

Normal Selling Process: Having second mortgage doesn't change how you market/sell

Disclose to Buyers: Not required to tell buyers about your loans (they'll see liens in title search)

Step 4: Closing

Title Company Coordinates:

• Wires payment to first mortgage lender
• Wires payment to HELOC lender
• Both lenders release liens
• You receive remaining proceeds

Same-Day Process: Usually completes within hours

Special HELOC Considerations

If You Haven't Used Full Line

Example: $50,000 HELOC, only drew $20,000

You Owe: Only $20,000 (plus interest)

Must Still Close Line: Even though not fully used

If HELOC Is with Same Lender as First Mortgage

Advantage: Single lender, simpler coordination

Process: Lender applies one payoff to both loans

If HELOC Is with Different Lender

More Coordination Required: Two separate institutions

Title Company Handles: They coordinate with both lenders

Slightly More Complex: But routine transaction for professionals

Tax Implications

Home Equity Loan Interest:

• Was tax-deductible if used for home improvements
• Not deductible if used for other purposes (after 2017 tax law changes)

Consult CPA: About your specific situation

Selling Home: Doesn't create special tax situation from having HELOC

Real Newton Example

Property: $210,000 sale price

Traditional Sale

First mortgage: $145,000 HELOC balance: $28,000 Real estate commission: $12,600 Closing costs: $4,200 Total Deductions: $189,800 Net Proceeds: $20,200 Timeline: 3-4 months

Cash Sale

First mortgage: $145,000 HELOC balance: $28,000 Commission: $0 Closing costs: $0 Total Deductions: $173,000 Cash Offer: $193,000 Net Proceeds: $20,000 Timeline: 2 weeks

Similar net, much faster closing.

Common Problems and Solutions

Problem: HELOC Lender Slow to Respond

Solution: Title company experienced with chasing lenders for payoffs

Start Early: Request payoffs 30 days before closing

Problem: Underwater After Both Loans

Solution: Short sale with both lenders' approval

• More complex than single mortgage short sale
• Both lenders must agree to accept less

Or: Bring cash to closing to cover shortfall

Problem: HELOC in Draw Period

Can Still Sell: Even if line is still active

Must Close Account: At sale

Can't Transfer: HELOC doesn't transfer to buyer

Questions Newton Sellers Ask

"Can I sell if I just took out HELOC?" Yes, no waiting period. Just pay it off at closing.

"What if HELOC is more than my equity?" You'll need to bring cash to closing or do short sale.

"Can buyer assume my HELOC?" No, HELOCs aren't assumable. Must be paid off.

"Do I pay penalty for paying off HELOC early?" Most HELOCs have no prepayment penalty. Check your loan documents.

"What happens to unused HELOC funds?" You lose access when home sells. Can't draw after sale.

Strategies to Maximize Net Proceeds

Pay Down HELOC Before Selling

If Possible: Reduce balance to increase your proceeds

Prioritize: Pay HELOC over first mortgage (usually higher interest)

Sell for Cash

Eliminate: Real estate commissions ($12,000+)

Often: Buyer pays closing costs

Result: More money to you after loan payoffs

Time the Market

Sell When Values High: More equity to work with

Don't Wait Too Long: If you need to sell, don't delay indefinitely

How Triton Homebuyers Helps

We buy Newton homes with HELOCs and home equity loans regularly:

We Handle:

• Coordinating with both lenders
• Obtaining payoff amounts
• Ensuring smooth closing

You Get:

• No real estate commissions
• We pay closing costs
• Fast closing (7-14 days)
• Simple, straightforward process

Your Net: Often similar to traditional sale, with much less hassle and time.

Contact Triton Homebuyers for a free cash offer on your home with a HELOC.