Can You Sell Your Home if You Have a HELOC?

Thinking about selling your home, but unsure how it will impact your home equity line of credit (HELOC)? You’re not alone. Many homeowners with a HELOC wonder if they can sell their property while still owing money on their line of credit. Well, the good news is that you can indeed sell your home even if you have a HELOC.

A HELOC is a revolving line of credit that allows you to borrow against the equity in your home. When you sell your home, you will need to pay off your existing mortgage and any outstanding balance on your HELOC. The proceeds from the sale can be used to settle these debts.

However, it’s important to be aware of the potential challenges and requirements involved in selling a home with a HELOC. From notifying your lender to understanding any prepayment penalties, there are a few factors to consider. In this article, we’ll explore the ins and outs of selling a home with a HELOC and provide you with the information you need to navigate the process smoothly. So, let’s dive in and learn more about selling a home with a HELOC.

What is home equity?

One of the key advantages of owning a home over renting is the ability to build equity. Your equity is the difference between what you owe on the home and what it’s worth. For example, let’s say your home’s current market value is $300k, and you have a $150k mortgage loan. In this case, your home equity is $150k ($300k – $150k = $150k.) 

Generally, people only get to access their home equity when they sell their homes and collect the proceeds. However, some people decide to take a loan secured by their home’s equity, such as a HELOC. 

What is a HELOC?

A home equity line of credit (HELOC) allows you to borrow against the equity in your home. With a HELOC, your house is collateral for the loan, which is why staying on top of your payments is crucial (or you could risk losing your home).  

When you apply for a HELOC, lenders will typically look at your credit score, your home’s current market value, and the amount of equity you have. If your credit needs some work or you haven’t accrued enough equity, lenders may be hesitant to approve you for a loan. If you receive a HELOC, you gain access to a low-interest credit line with flexible purchase and repayment options.

Homeowners take out home equity loans for various reasons. Common purchases one may make with a HELOC include:

  • Home repairs/renovations
  • Children’s college education
  • Buying a second property
  • Debt consolidation
  • Finance other large purchases

HELOC’s are a convenient funding option for expenses you wouldn’t be able to afford with cash. However, there are drawbacks, such as the risk of losing your home if you default on your loan. This is why taking out a HELOC is a serious decision you should only consider if you can easily afford the payments. 

It’s also important to note that a HELOC is a separate loan from your mortgage. While your mortgage is used to purchase your home, a HELOC allows you to tap into the equity you have built up over time. This means that even if you have a HELOC, you still have the option to sell your home.

Can you sell a house with a HELOC?

Yes, when you decide to sell your home, having a HELOC does not prevent you from doing so. Lenders don’t have a preference on how you repay your HELOC loan as long as it gets repaid. The most common way to pay off a HELOC is from the money you receive from the sale of your home. 

Many homeowners worry that they have to pay off their HELOC before listing their house. Fortunately, you can go ahead and start the selling process with an open HELOC. As long as you repay the loan by closing, there shouldn’t be any delays. Paying off your home equity loan from the sale proceeds is the easiest and fastest option — so if you’re in a rush to sell, this might be the best option for you.

What if you don’t have enough equity to pay off a HELOC?

Selling a home with a HELOC is generally a smooth process — however, things get tricky if you owe more than your house is worth, also known as being “underwater.” For example, if you owe $200,000 on your current mortgage and have a $20,000 balance on a HELOC, you would need to sell your home for at least $220,000 to be able to repay your debts. 

If the sale price of your home won’t cover your debt obligations, you will need to find an alternative way to repay the loan or finance the difference. In this case, you may want to consider delaying selling your home until your equity increases, or you find another way to pay off the equity loan. 

Negotiate with your lender 

If you don’t have sufficient equity to pay off your HELOC from the sale proceeds, you should contact your lender immediately. In some cases, your lender might agree to settle your balance for less than you owe — known as a “short sale.”

Convert to an unsecured line of credit 

Another way to secure funding to repay your HELOC is to ask your bank if they will convert it to an unsecured line of credit. Be aware that many lenders are hesitant to do this because it’s riskier for them — since your property will no longer secure the loan. However, your approval odds increase if you have good credit and a relatively low balance on your HELOC. 

Keep in mind that this option will likely result in a higher interest rate and monthly payment — which is why you may want to consider other options first. 

Take out a personal loan

If you have good credit, you may be able to take out an unsecured personal loan to pay off your HELOC. Just be sure to shop around to try and find and compare loans with a reasonable interest rate and favorable terms.

Use personal assets to pay off the loan

If you’re unable to pay off your HELOC through other funding sources, you may have to consider using your savings or assets. For example, maybe you have a boat or vehicle you can sell to come up with the cash. You can also consider borrowing against your retirement account, such as your 401(K) — but this should be a last resort.

Pros and cons of selling a home with a HELOC

Selling a home with a HELOC has its advantages and disadvantages. Let’s take a look at some of the pros and cons:


  1. Flexibility: Having a HELOC gives you the flexibility to tap into your home’s equity whenever you need it. This can be beneficial if you need to access funds for emergencies or other expenses.
  2. Lower interest rates: HELOCs often come with lower interest rates compared to other forms of credit, such as credit cards or personal loans. This can save you money in interest payments over time.
  3. Potential tax advantages: In some cases, the interest paid on a HELOC may be tax-deductible. Consult with a tax professional to determine if you qualify for any tax benefits.


  1. Additional debt: Selling a home with a HELOC means that you will need to pay off the outstanding balance on your line of credit. This can increase your overall debt load and reduce the amount of money you receive from the sale.
  2. Prepayment penalties: Some HELOCs come with prepayment penalties, which are fees charged if you pay off the loan before a certain period of time. Make sure to check the terms of your HELOC to see if there are any penalties that may apply.
  3. Impact on credit score: Selling your home with a HELOC may have an impact on your credit score. It’s important to manage your debt responsibly and make all necessary payments on time to minimize any negative effects.

How to Sell a Home with a HELOC [Step by Step]

Selling a home with a HELOC requires careful planning and coordination. Here are the steps you should follow to navigate the process successfully:

  1. Notify your lender: As soon as you decide to sell your home, it’s important to notify your lender and inform them of your plans. They will provide you with the necessary information and instructions on how to proceed.
  2. Hire a real estate agent: Working with a professional real estate agent who has experience dealing with HELOCs can be beneficial. They can guide you through the process and help you maximize the sale price of your home.
  3. Determine the outstanding balance on your HELOC: Contact your lender and request an up-to-date statement that shows the remaining balance on your HELOC. This will give you a clear idea of how much you will need to pay off when you sell your home.
  4. Calculate your equity: To determine how much money you will receive from the sale, subtract the outstanding balance on your mortgage and HELOC from the estimated sale price of your home. This will give you an estimate of your equity.
  5. Settle your debts: Use the proceeds from the sale to pay off your mortgage and HELOC. Make sure to follow the instructions provided by your lender to ensure a smooth transaction.
  6. Close the sale: Once all debts are settled, the sale can be finalized. Work with your real estate agent and follow the necessary legal procedures to close the sale and transfer ownership of the property.

What if I can’t pay off my HELOC before selling?

If you find yourself unable to pay off your HELOC before selling your home, there are a few alternative options you can consider:

  1. Negotiate with your lender: Reach out to your lender and explain your situation. They may be willing to work with you and come up with a solution that allows you to sell your home without fully paying off your HELOC.
  2. Set up a repayment plan: If you can’t pay off your HELOC in full, you can propose a repayment plan to your lender. This will allow you to make regular payments towards the outstanding balance even after selling your home.
  3. Consider a short sale: In certain situations, a short sale may be an option. This involves selling your home for less than the outstanding balance on your mortgage and HELOC. However, it’s important to note that this can have a significant impact on your credit score.

It’s important to explore these options with the guidance of a professional, such as a real estate agent or financial advisor. They will be able to help you assess your situation and determine the best course of action.

Sell your Home Fast for Cash

Selling a home with a HELOC is entirely possible, but it does require careful planning and coordination. If you need to sell your house fast, consider selling to us!

We offer fair cash prices to homeowners across the state of Massachusetts. Best of all, we buy your home in any condition, so there’s no need to worry about costly repair work.

Have a HELOC attached to your house? We may still be able to help. Give us a call at 781-309-7085 or reach out via our online form today.

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