Are you thinking about selling your home but still having a HELOC balance? You’re not the only one asking this question. Many homeowners use their equity to borrow for things like renovations, education, or debt consolidation—and then later decide to move.
So what exactly happens to your home equity line of credit when it’s time to sell? Can you transfer it to the next house, or must it be paid off first? Understanding this can help you avoid surprises during the selling process and make smarter decisions. Learn more about HELOCs.
Your HELOC Must Be Paid Off Before Closing
When you sell your home, you must pay off any outstanding balances tied to it—including your HELOC. A home sale can’t officially close until all liens on the property are cleared, including a home equity line of credit. Like your original mortgage, your HELOC is secured by your home, so it must be paid in full from your sale proceeds. This means that when the sale is finalized, part of the money you receive will go directly toward closing out the HELOC.
You Can’t Transfer a HELOC to the New Property
If you think you can just roll your HELOC over to your new home, that’s not how it works. HELOCs are linked to the specific property they’re taken out on. So, once that home is sold, the line of credit must be closed out. If you want to use a HELOC on your new home, you’ll need to apply for a brand-new one after the purchase is complete. If you’ve had a good experience with your lender and your financial profile is intense, applying for a new HELOC might be smooth.
Your Lender May Freeze the HELOC Once You List
Sometimes, once your lender finds out you’ve listed your home for sale, they might freeze the HELOC to prevent you from borrowing more. This is because the non-repayment risk increases when the house securing the loan is about to change hands. That doesn’t mean you’ve done anything wrong—it’s just part of the lender’s policy to protect their investment. You’ll still be responsible for repaying whatever you’ve borrowed, but don’t be surprised if your access to additional funds is restricted once your home hits the market.
What Happens If Your Sale Price Doesn’t Cover It All?
Ideally, your home sells for enough to pay off the HELOC and the primary mortgage, leaving you with leftover profit. But in cases where the sale price doesn’t fully cover your debts, things get more complicated. You’ll be expected to pay the difference out of pocket to close the deal. For example, if your total debt on the home is $350,000, but your house sells for $340,000, you’ll need to bring $10,000 to the table. If that’s not possible, you may need to negotiate a short sale with your lenders, which can impact your credit and delay your future borrowing ability.
How to Prepare for a Smooth Sale?
If you plan to sell your home and have a HELOC, the best approach is to be proactive. Start by contacting your lender and getting an exact payoff amount for the HELOC. That way, you’ll know how much needs to be settled and can work that into your sale price or negotiations. Once your home is sold and the HELOC is paid off. If you want to open a HELOC on your new home, companies like AmeriSave offer options that are easy to understand and built around your financial goals.
Selling a home with a HELOC might seem like a small hurdle, but it’s manageable with the right planning. By understanding what to expect and working closely with your lender, you can stay ahead of potential issues. Keep your real estate team informed throughout the process, and you’ll be able to move confidently from one chapter to the next—without unexpected delays.
