Beginner heloc question

[Alberto Gomez]

Hello everyone. I have a question about helocs that I'm having a tough time understanding/finding info on. So if you get a heloc on property A to pay for a down payment on property B and then you sell property A and the heloc isn't paid off yet what happens? Do you have to basically accept at this point that portions or all of the money you make on that sale goes to pay off the heloc? I have had a difficult time finding info specifically on this. Any help on this would be greatly appreciated. Thank you all.

[Matthew Crivelli]

When you receive a HELOC the lender will preform an appraisal on the property and lend based off of that valuation. So in theory the lender wont give you more money than equity available in your home. If your home is worth 200k and you have a first position lien of 100k (regular mortgage), than you have access to 100k if you were to take out a HELOC. If you use the entire HELOC your home would be mortgaged for 200k. If you were to sell the house you would want to sell it for enough to cover both notes. If you sold for less you would be on the hook for the difference at closing. Many people after the 2008 crisis were stuck in there homes because of this, the amount they owed was more than the home was worth. This is an example of over leveraging your homes equity. I would take as little as possible if this is going to be a second mortgage. Leave as much equity in your home as possible.