If I sell my house, do I have to also pay off my second mortgage at the same time?
Leah asked:
I’m looking into selling my house. A couple of years ago, I took out a home equity loan to cover unexpected expenses. Can I pay off the mortgage loan, but still make payments on the home equity loan for the remainder of it’s term? I don’t think I will be able to sell the house for the combined payoff of both loans.
Joan
I’m looking into selling my house. A couple of years ago, I took out a home equity loan to cover unexpected expenses. Can I pay off the mortgage loan, but still make payments on the home equity loan for the remainder of it’s term? I don’t think I will be able to sell the house for the combined payoff of both loans.
Joan
Tags: Home Equity Loan, Remainder, Selling House
July 29th, 2009 at 5:22 pm
Wilma
No. The HELOC was given to you and secured by your home. There is NO WAY to sell your home and not pay off the second mortgage.
End of story.
July 31st, 2009 at 6:54 am
Julio
You better believe it. Your second mortgage undoubtedly has a “due on sale” provision that makes it due and payable on sale. It also is a lien on the property which would prevent a buyer from getting a loan to pay you for the house if the obligation is unpaid.
July 31st, 2009 at 11:01 pm
Elsie
When you sell your home you no longer have any collateral for your equity loan so YES, it HAS to be paid off at settlement. If you do not have enough money coming back to pay both loans then you will owe money at settlement that you must pay or the sale is invalid.
August 3rd, 2009 at 6:43 am
Florence
Yes, you’ll have to pay off all the loans you’ve taken out using the property as collateral.
If you can’t, then you’ll need to work something out with the lender to get them to release their lien against the property, or you won’t be able to convey clear title, and nobody will be willing to buy it.
August 3rd, 2009 at 12:51 pm
Cody
You probably need to pay off the second mortgage, since it is secured by the house you want to sell. However, I would double check your paperwork. If you still have a copy of the note, you should be able to find this information to know for sure. In all likelhood, you will need to pay off this second mortgage - sorry to be the bearer of bad news!
August 4th, 2009 at 8:53 am
Adrian
If your equity loan is using the house as collateral and you sell the home, then yes the lender would expect you to pay of the loan. So the answer is yes, you will be required to pay off any loans, liens etc. against the property, at closing. If you find you may not have enough to cover both loans, you should be prepared for one of them to file a 1099 form to the IRS for the balance due. Which in effect grosses up your income for the year. So I would contact the lenders ahead of this scenario and see what your options are. Don’t wait because it only makes you look bad and then they won’t work with you.
August 7th, 2009 at 7:41 am
Juan
NO. Both loans will be required to be paid off in order to have a closing with clear title.
August 7th, 2009 at 1:40 pm
Evelyn
The line of credit is secured by the property and their is a lien against that property.
You will have to pay off the second.