If you’re like me, your home is your biggest asset. When I need cash to help out with unexpected expenses or needed home repairs, I may turn to the equity in my home. Because I’m putting my home up as collateral, home equity loans are often easier to attain and offer lower interest rates because the bank can foreclose on my home if I default on the loan. After I’ve taken a home equity loan, however, I may need to sell my house before the loan is paid in full.
Sell My House with a Home Equity Loan
If you want to sell your house while you’re still paying down a home equity loan, you’ll need to pay off the full loan amount before the sale becomes final. The best way to do this is to sell your home for a price high enough to net enough money to pay off both the equity loan and any remaining mortgage. You can meet with a Realtor to determine the value of your property and negotiate their commission so that you are able to sell the home and still pay off the loan.
Contact your bank to discuss potential penalties for paying off your loan early. Some home equity loans have a prepayment penalty. If this is the case, factor this cost into your asking price or ask your bank if they could waive the fee.
Listing Your Home for Sale
Fortunately, you don’t have to pay off the loan just to list it for sale. The loan will not become due until you’ve found a buyer and are ready to transfer the title. Although you don’t have to pay the loan back right away, lenders will not allow the buyer to get a loan until you pay off the home equity loan.
Any outstanding liens on the property – including home equity loans – automatically transfer to the buyer if they aren’t cleared before the sale. By working with a cash buyer, you could delay repayment of the loan as long as possible. However, it will still be due when it comes time to transfer the title, unless you work with the buyer to offset the loan in the selling price.
Selling a Distressed Property
If your property is worth less than you owe, then you may feel trapped. However, you can still sell the house, though you may have to pay back your loan before the sale is final. Talk to your lender to make arrangements for paying back both your mortgage and the home equity loan. You may be able to borrow money through a personal loan to cover the costs.
Some lenders will work with you to spread out your payments, or they may accept a lower amount of money as payoff for your loan. This is called a short sale and may be granted if your lender knows that the alternative is a default on the loan. Making a short sale is easier if you work with someone who is familiar with the process, such as a home investor. If you’re unable to pay off your loan but need to sell the property, you’ll need to make these arrangements in advance.
Selling Your Home Fast
For many homeowners, a quick sale is essential. If you need out of your property today but are struggling to pay back a home equity loan, then a home investor could be the right choice for you. Cash buyers have more flexibility than buyers who rely on financing. They also have experience and advice for navigating the legal hurdles you’ll encounter when you have a home equity loan. If you call today, you could have an offer on your home in as little as 48 hours.