
Home equity loans vs. HELOC<\/h2><\/div>There are two main types of equity-based second mortgages: home equity loans and home equity lines of credit (HELOCs).<\/p>\n
<\/div>\nHome equity loans<\/h3>\n
A home equity loan<\/a> is a type of second mortgage that taps into your home\u2019s equity with a one-time lump sum. You pay the loan back in monthly installments with interest, just like your original mortgage.<\/p>\n<\/div>\nHome equity line of credit (HELOC)<\/h3>\n
A home equity line of credit (HELOC<\/a>) is also a second mortgage, but your lender won\u2019t give you a lump sum of money. Instead, your lender approves you for a revolving line of credit and you withdraw what you need when you need it. It\u2019s similar to a credit card, where you receive a credit limit that you can\u2019t go over and pay interest only on the funds you use.<\/p>\n<\/div>\n6 steps to selling your house with a second mortgage<\/h2>\n
Selling your house with a second mortgage is definitely doable, as long as you follow a few best practices. Here are six steps to take before you sell with a second mortgage:<\/p>\n
<\/div>\n1. Double check the value of your house<\/h3>\n
If you have a home equity loan or other second mortgage, it\u2019s important to make sure your home\u2019s sale price<\/a> covers the remaining balance of both of your mortgages. This will protect you from being stuck with an unexpected bill once the sale is final. To prepare for a sale, you\u2019ll need to calculate the following:<\/p>\n\n- The value of your home.<\/li>\n
- The totals are still owed on each mortgage.<\/li>\n
- How much money you\u2019d have left after paying off both mortgages.<\/li>\n
- How much it will cost to sell your home<\/a>.<\/li>\n<\/ul>\n
Most real estate agents use a seller\u2019s net sheet<\/a> to help calculate these results. It\u2019s one good reason to hire a top real estate agent who has whipped up hundreds of these documents before, especially if you face a more complicated financial situation.<\/p>\nRenee Kolar<\/a>, a real estate agent with 37 years of real estate experience, provides every seller with a net sheet, which shows what the owner owes on the following:<\/p>\n\n- Each mortgage.<\/li>\n
- Property taxes.<\/li>\n
- Closing costs.<\/li>\n
- Any commissions.<\/li>\n<\/ul>\n
Kolar says she tries to make sure that every client she works with has a net sheet that\u2019s accurate to within $100 or so at closing.<\/p>\n
Want to gauge the net proceeds<\/a> on your own? Here\u2019s how you do it:<\/p>\n\n- Figure out how much your house is worth. HomeLight\u2019s Home Value Estimator<\/a> is a great starting point for gauging your home\u2019s worth. It gathers data and property information from multiple sources to provide you with a real-time estimate. To confirm results, you can also grab a comparative market analysis (CMA)<\/a> from a local agent or obtain a professional appraisal<\/a> to lock down your home\u2019s value<\/a>.<\/li>\n
- Deduct selling expenses and the outstanding debt of both mortgages. Take the sales price of your home and subtract any and all liens on the property and total selling costs, which may include closing costs, transfer taxes, real estate commissions<\/a>, and any credits you are giving to the buyer.<\/li>\n<\/ul>\n
Pro tip: When in doubt about your payoff amount, contact your loan service provider. They\u2019re required to show<\/a> you the total amount you\u2019ll need to pay to satisfy a loan.<\/p>\n<\/div>\n2. Go over prepayment penalties with your lender.<\/h3>\n
A prepayment penalty<\/a> is a fee some lenders charge if you pay off your mortgage early. Most mortgages today don\u2019t have a prepayment penalty, but they do exist. The fee typically applies only when you pay off the entire mortgage balance within a specific period, usually within the initial three years of the loan.<\/p>\nNot sure whether you agreed to a prepayment penalty on your second mortgage? Check with your lender to confirm whether a prepayment penalty exists and how much it is.<\/p>\n
<\/div>\n3. Gather documentation for your second mortgage paperwork<\/h3>\n
Nobody likes dealing with documents, but the reality is that selling your home involves a lot of paperwork. You can speed up the process by giving your real estate agent or title company copies of your second mortgage paperwork<\/a>.<\/p>\n<\/div><\/div><\/div><\/section>\t\t\r\n\t\t\t\r\n\t\t\tTo set your title company up for success, you\u2019ll want to nail down two things:<\/p>\n
\n- Make sure that the title of your house<\/a> is clear. That means there shouldn\u2019t be any outstanding liens<\/a> or judgments on the property.<\/li>\n
- Determine your mortgage payoff estimate. This will be how much you need to pay back to cover both mortgages when you sell.<\/li>\n<\/ol>\n\t\t<\/div>\r\n\t\t<\/div><\/div><\/div><\/section>
Kolar says she tries to get that information up front and divvies it out to the parties who need it for her clients.<\/p>\n
\u201cThe day I meet the seller, I want a copy of their property survey, I want their statements on all their mortgages, I want any disclosures, any documentation, any inspections<\/a>,\u201d she says. \u201cWe\u2019re going to need it at some point, so we might as well get it up front and not waste time later.\u201d<\/p>\nTo save yourself time and headaches, find a real estate agent<\/a> who wants to speed up the process and who can take care of as much documentation as possible on your behalf.<\/p>\n<\/div>\n4. Work with a top agent<\/h3>\n
Especially if you\u2019re selling your home with a second mortgage, you\u2019ll want to lean on a real estate agent who has a proven sales track record. Remember, if you sell your house with a second mortgage, your sale needs to cover both of your mortgages plus all your selling expenses to make a profit.<\/p>\n
Top real estate agents know how to list your home at a price that maximizes your returns. In fact, according to the National Association of Realtors\u00ae, 86% of recent buyers<\/a> acquired their homes through the assistance of a real estate agent or broker, while 10% made direct purchases from the previous owner.<\/p>\nUltimately, that means you could end up with a higher sale price to help you cover the balances on your outstanding mortgages.<\/p>\n
If you want to locate a top agent who is an expert at selling in your area, try out the HomeLight Agent Finder<\/a> platform. You\u2019ll be matched with experienced agents who know how to sell homes in your location and can help maximize your home value when you sell.<\/p>\n<\/div><\/div><\/div><\/section>\t\t\t\r\n\t\t\t\t\t\n\t\t\n\t\t\t\n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t
\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\n\t\t\t\t\t\t\t\t\n\t\t\t\t\tCan You Sell a House With a Mortgage?\t\t\t\t<\/span>\n\n\t\t\t\t\n \n \t\n \t\tLearn more \t<\/span>\n \t\t\t<\/div>\n\t\t<\/a>\n\t<\/div>\n\t\n\t\t\n\t\t\t\n\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t
\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\n\t\t\t\t\t\t\t\t\n\t\t\t\t\tWhat Is A Short Sale and Is It A Good Idea As A Buyer?\t\t\t\t<\/span>\n\n\t\t\t\t\n \n \t\n \t\tLearn more \t<\/span>\n \t\t\t<\/div>\n\t\t<\/a>\n\t<\/div>\n\t\t\t<\/div>\r\n\t\t\t<\/div><\/div><\/div><\/section><\/div>\n5. When you sell a house with a second mortgage, pay off both mortgages<\/h3>\n
You do need to pay your second mortgage<\/a> when you sell your home. When the deal closes, your home\u2019s sale price should pay off both mortgages, plus selling expenses. As long as you\u2019ve covered those costs, you\u2019ll then be paid the amount of the remaining proceeds.<\/p>\n\u201cIt really should not make a difference how many mortgages you owe and what is owed, so long as you have the money to pay it off,\u201d says Chris Baumann<\/a>, the business development team leader at Socotra Capital and top loan originator in the San Francisco Bay area.<\/p>\n<\/div>\n6. Know what to do if the sale does not cover your mortgage balances<\/h3>\n
After you do the math, you may find out you\u2019re going to owe more money than you planned after the sale. Although it\u2019s not the ideal choice to have to fork out more than you expected, you may still have options.<\/p>\n
\u201cThe sales price must be able to pay off both mortgages in full, otherwise you will end up having to come to the settlement table with the difference or enter into a short sale agreement with one or both of the lien holders,\u201d says Paul Swanson<\/a>, residential mortgage financing expert.<\/p>\n<\/div><\/div><\/div><\/section>\t\t\r\n\t\t\t\r\n\t\t\tIf you can\u2019t pay back your second mortgage, here are your best options:<\/p>\n
\n- Find a way to cover the costs of the second mortgage through separate investments, a windfall, or other avenues.<\/li>\n
- Talk to your lender about a short sale<\/a>. During a short sale, the lender agrees to let you sell the home for less than what they\u2019re owed. Just keep in mind that you must be able to offer the lender proof that you aren\u2019t able to pay off the rest of the mortgage to qualify for a short sale.<\/li>\n<\/ol>\n\t\t<\/div>\r\n\t\t<\/div><\/div><\/div><\/section>
There are two main types of equity-based second mortgages: home equity loans and home equity lines of credit (HELOCs).<\/p>\n
Home equity loans<\/h3>\n
A home equity loan<\/a> is a type of second mortgage that taps into your home\u2019s equity with a one-time lump sum. You pay the loan back in monthly installments with interest, just like your original mortgage.<\/p>\n A home equity line of credit (HELOC<\/a>) is also a second mortgage, but your lender won\u2019t give you a lump sum of money. Instead, your lender approves you for a revolving line of credit and you withdraw what you need when you need it. It\u2019s similar to a credit card, where you receive a credit limit that you can\u2019t go over and pay interest only on the funds you use.<\/p>\n Selling your house with a second mortgage is definitely doable, as long as you follow a few best practices. Here are six steps to take before you sell with a second mortgage:<\/p>\n If you have a home equity loan or other second mortgage, it\u2019s important to make sure your home\u2019s sale price<\/a> covers the remaining balance of both of your mortgages. This will protect you from being stuck with an unexpected bill once the sale is final. To prepare for a sale, you\u2019ll need to calculate the following:<\/p>\n Most real estate agents use a seller\u2019s net sheet<\/a> to help calculate these results. It\u2019s one good reason to hire a top real estate agent who has whipped up hundreds of these documents before, especially if you face a more complicated financial situation.<\/p>\n Renee Kolar<\/a>, a real estate agent with 37 years of real estate experience, provides every seller with a net sheet, which shows what the owner owes on the following:<\/p>\n Kolar says she tries to make sure that every client she works with has a net sheet that\u2019s accurate to within $100 or so at closing.<\/p>\n Want to gauge the net proceeds<\/a> on your own? Here\u2019s how you do it:<\/p>\n Pro tip: When in doubt about your payoff amount, contact your loan service provider. They\u2019re required to show<\/a> you the total amount you\u2019ll need to pay to satisfy a loan.<\/p>\n A prepayment penalty<\/a> is a fee some lenders charge if you pay off your mortgage early. Most mortgages today don\u2019t have a prepayment penalty, but they do exist. The fee typically applies only when you pay off the entire mortgage balance within a specific period, usually within the initial three years of the loan.<\/p>\n Not sure whether you agreed to a prepayment penalty on your second mortgage? Check with your lender to confirm whether a prepayment penalty exists and how much it is.<\/p>\n Nobody likes dealing with documents, but the reality is that selling your home involves a lot of paperwork. You can speed up the process by giving your real estate agent or title company copies of your second mortgage paperwork<\/a>.<\/p>\n<\/div><\/div><\/div><\/section> To set your title company up for success, you\u2019ll want to nail down two things:<\/p>\n Kolar says she tries to get that information up front and divvies it out to the parties who need it for her clients.<\/p>\n \u201cThe day I meet the seller, I want a copy of their property survey, I want their statements on all their mortgages, I want any disclosures, any documentation, any inspections<\/a>,\u201d she says. \u201cWe\u2019re going to need it at some point, so we might as well get it up front and not waste time later.\u201d<\/p>\n To save yourself time and headaches, find a real estate agent<\/a> who wants to speed up the process and who can take care of as much documentation as possible on your behalf.<\/p>\n Especially if you\u2019re selling your home with a second mortgage, you\u2019ll want to lean on a real estate agent who has a proven sales track record. Remember, if you sell your house with a second mortgage, your sale needs to cover both of your mortgages plus all your selling expenses to make a profit.<\/p>\n Top real estate agents know how to list your home at a price that maximizes your returns. In fact, according to the National Association of Realtors\u00ae, 86% of recent buyers<\/a> acquired their homes through the assistance of a real estate agent or broker, while 10% made direct purchases from the previous owner.<\/p>\n Ultimately, that means you could end up with a higher sale price to help you cover the balances on your outstanding mortgages.<\/p>\n If you want to locate a top agent who is an expert at selling in your area, try out the HomeLight Agent Finder<\/a> platform. You\u2019ll be matched with experienced agents who know how to sell homes in your location and can help maximize your home value when you sell.<\/p>\n<\/div><\/div><\/div><\/section> You do need to pay your second mortgage<\/a> when you sell your home. When the deal closes, your home\u2019s sale price should pay off both mortgages, plus selling expenses. As long as you\u2019ve covered those costs, you\u2019ll then be paid the amount of the remaining proceeds.<\/p>\n \u201cIt really should not make a difference how many mortgages you owe and what is owed, so long as you have the money to pay it off,\u201d says Chris Baumann<\/a>, the business development team leader at Socotra Capital and top loan originator in the San Francisco Bay area.<\/p>\n After you do the math, you may find out you\u2019re going to owe more money than you planned after the sale. Although it\u2019s not the ideal choice to have to fork out more than you expected, you may still have options.<\/p>\n \u201cThe sales price must be able to pay off both mortgages in full, otherwise you will end up having to come to the settlement table with the difference or enter into a short sale agreement with one or both of the lien holders,\u201d says Paul Swanson<\/a>, residential mortgage financing expert.<\/p>\n<\/div><\/div><\/div><\/section> If you can\u2019t pay back your second mortgage, here are your best options:<\/p>\nHome equity line of credit (HELOC)<\/h3>\n
6 steps to selling your house with a second mortgage<\/h2>\n
1. Double check the value of your house<\/h3>\n
\n
\n
\n
2. Go over prepayment penalties with your lender.<\/h3>\n
3. Gather documentation for your second mortgage paperwork<\/h3>\n
\n
4. Work with a top agent<\/h3>\n
\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t
\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t
5. When you sell a house with a second mortgage, pay off both mortgages<\/h3>\n
6. Know what to do if the sale does not cover your mortgage balances<\/h3>\n
\n