"Many borrowers use the proceeds from their home sale to pay off their home equity loan. Selling your house with a home equity loan can involve some complications if you owe more than your home is worth. Be sure to do your research before putting your house on the market to ensure you're not underwater on your mortgage or loan. Be prepared for possible early repayment penalties and tax implications."
"Figuring out exactly what you owe requires looking at both your primary mortgage and that second loan. Start by requesting payoff statements from both lenders, as these will give you the precise amounts needed to fully satisfy each loan as of your anticipated closing date. Keep in mind that these balances include not just the principal you borrowed, but also any accrued interest, and the amounts will increase daily until you pay them off."
A house with a home equity loan can be sold by using sale proceeds to pay off the second lien. Selling becomes complicated if the combined loan balances exceed the home value, so verify whether the property is underwater before listing. Request payoff statements from both lenders to obtain exact balances, including accrued interest that increases daily until paid. A home equity loan functions as a second mortgage, and both loans must be settled at closing. Title companies or closing attorneys typically coordinate payoffs. Subtract loan payoffs and estimated closing costs from the expected sale price to estimate net proceeds.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
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