When your home is sold before you will get the money the lawyer who is handling the deal will first pay off your mortgage, then all secured loans which were issued against the property like Home Equity Line Of Credit.

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Hi, to buy new house i took heloc against my old house which i planned to sell shortly to pay off heloc. i could not sell my old house so i am using it as rental property now. i want to convert heloc into fixed rate secondary mortgage. if i convert heloc into fixed rate mortgage, when i sell my rental property will the money from sale be transferred to my primary mortgage company without lump sum distribution to avoid tax penalty? thank you

You might be able to convert the heloc, but two items, one the rate on home equity loans are usually high, and two, home equities are tougher to come by, especially on a rental property. you could look into locking the rate like mary suggested, it depends on the lender and when you took out the heloc as the lock in feature has only been around for a few years. If you sell the rental, any proceeds will be given to you, other arrangements I would consult the irs or a cpa. you may want to look at bank of america for the home equity, I was just talking to a broker contact of mine and she claims they are doing home equities still, best of luck

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Mortgage was paid, heloc did not show up in title search. i no longer own the home.

How did you manage to "forget" that you had a HELOC? In your Affidavit of Title, you would have had to swear that there were no other outstanding mortgages or liens, etc that were not being paid off with the sale. You had a duty to inform them of any known items that did not show up in the title search . Occasionally documents are filed in the wrong county, etc so they don't show up on the search. That in no way absolves you from the responsibility of paying. Pay off that HELOC right now and close the account, and make sure the discharge is filed. It is your only hope of not getting sued for fraud.

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Do you just keep paying the loan like normal or do you have to pay it off when the house is sold?

All liens must be satisfied at closing when you sell. Example: $100,000 1st mortgage $20,000 HELOC You would need to sell for at least the $120,000 to break even (not counting REALTOR commissions, closing costs, etc.)

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Took some cash out. now my house is for sale. depending on negotiations and im looking at it from a worst case scenario, ill have enough to pay the balance, agent commisions, and the closing costs and the remainder to the heloc (home equity line of credit) unfortunately im short by about 8k. but ill rather sell the house and worry about this later. will the bank work with me on this one. any advice/ suggestions not that important but i have excellent credit

No they won't. HELOC's are also second mortgages. They are a lien against your property. You'll have to bring money to closing or you cannot give the new owners clear title , and that will violate the terms of your sales contract. The bank WILL NOT release the lien until it's paid off.

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What everyone stated is correct. The HELOC uses your home as collateral. Once your home is sold the lender no longer has that collateral. At close of escrow your HELOC will close and any balance will be paid out of your proceeds.

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Details are a must here, but i'll try to be brief...heloc payment is 132. cc payments would likely be 300. my wife spends 300 in gas every month driving to where we want to move. if we could knock a few grand off our house, we could get it sold. paying off heloc avoids the need for a short sale, and our rent payments will be hundreds less than our current total mortgage payments, as well as the savings in utilities with the right apartment. getting out of our house is our primary focus right now. the extra cc debt is manageable. from all angles this seems to have the potential for the least damage to our credit. the payment of 300 is based on the full amount of the heloc being converted, we may only need to carry half of it in cc debt. worrying about our income changing is not an option. all indicators point to it going up just by moving. is this crazy or reasonable? anybody done this before? did you make it work? did you call your cc issuer with a plan, our cash out a convenience check? roflcopter-types need not bother please. this is serious adult stuff... thanks steve! i should have mentioned i tend to get convenience checks every other week offering 5% for the life, which is also less than my heloc %. tax savings are never realized from this mortgage, it is too small, and we can't itemize anyway.

Actually, this looks like a sane and doable plan. The one change I would make would be to look around for a new credit card with a low interest teaser rate (one of those 4.99% for 12 month cards) with a regular interest rate around what you are paying now. Obviously, once you get it done, throw as much at the CC to pay it down (the original 132 HELOC payment, plus as much of the rent/mortgage differential and the gas savings). If you can't ind a teaser rate card, you will need to make sure your CC limit is high enough to cover enough of the HELOC you want paid - if not , you will have to call the CC company to get the limit raised and ask for balance transfer checks.

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We own a house in california in which we currently reside. if we sell the house, what are the tax consequences on the gains that have already been spent? we took a home equity line of credit over the years which is now exhausted, but for which we are still liable in the form of monthly payments. once we sell are we obliged to pay that off immediately? or can we re-invest our profit from the sale to avoid taxes and hold on to the loan?

Capital Gains are the difference between what you bought the house for plus improvements and what you sell it for. What you owe on it is irrelevant. If you lived in it for 2 of the 5 years prior to selling it, the first $500k in gains (if married) is tax free. The HELOC will be paid off at closing. You can not just continue to make payments. It is possible to walk away from closing with absolutely no cash if you owe as much as you sell the house for. EDIT - Note: The "reinvest in another property" rule went away in 1997.

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I am in a forclosure situation: purchase price: 275,000 (2004) refinanced in 2005 and took out a heloc heloc: 100,000 my estimated price for selling is going to be 330,000. will i have to pay any taxes on the potential sell of my house. if so are there any ways out ie: proving financial hardship.

You will have a gain on the sale of about $55,000 ($330,000 - $275,000). Whether this will be taxable or not will depend upon the facts however you should qualify for the exclusion if you lived in the home for at least 2 years. On the short sale you may have a debt forgiveness. How much that will be will depend upon the wording of your mortgage and the HELOC and the total debt oustanding . If the mortgage and the HELOC are without recourse, there will be no debt fogiveness and therefore no taxable gain. If they are with recourse, the total debt less the sale proceeds will determine the forgiven debt and the taxable gain. The gain on Cancellation of Debt is not subject to the capital gain exclusion. You can avoid the tax bite on it if you were insolvent at the time of the COD. You are insolvent if your liabilities exceed the value of your assets. File Form 982 with your tax return along with a statement of your assets and liabilities immediately prior to the COD to claim exemption from tax on the COD. If the amount of your insolvency exceeds the COD there will be no taxable gain. If it's less, the difference is taxable to you as ordinary income.

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I asked a similar question earlier today and a couple people said it would be fraud. looking around the web it is suggested on several websites as an option for home buying , but i can't post the links. we own our house valued at 70k. we have a small home improvement loan out now 15k. we want to buy a 125k house so we need 25k down. our mortgage broker suggested a line of credit, we can buy the house we want.move.fix up the old house a little bit. sell it.then pay off the heloc. what is fraudulant ? i want the heloc specifically to buy another house. my broker said it would be cheaper interest than a 80/20 or 100% financing or even a bridge loan.(i should mention that he is a friend of the family and not likely to steer me into something illegal knowingly.) any advice would be greatly appreciated. thank you in advance.

As I answered in your earlier email, people do, do this all the time, but usually to purchase a 2nd home or a vacation home or even a rental property. Read below about your house on the market (could be a catch 22) There is nothing wrong or illegal about it at all. Equity is Equity, period. As long as you can carry both mortgages totaling $140,000 then you shouldn't have an issue. Banks don't dictate what you spend the cash on. It is a line of credit to be spent how, when and where you like it. However, home equity lines of credit are tied to the prime rate. Prime rate is currently 8.25% and adjusts monthly. Read the following ... http://money.cnn.com/2007/04/11/news/economy/fed_minutes.reut/index.htm?postversion=2007041114 it is an article out today on CNNfn stating that the Fed may being raising the fed fund rate again. Add 3% to the fed fund rate and you get the prime. Worst case scenario ... it goes up .25% each month for the next 6 months or 1.50%. If you can handle these potential increases then go for it. But, nothing illegal. However, like I mentioned earlier, check with him before placing your home on the market. Many lenders will not lend any money on a home if it is on the market. You may have to get the equity line of credit and close on it first. Then put your home on the market. Then you can purchase your new home (with your home on the market) you can prove your new home will be a "primary residence" or in other words "owner occupied"

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Bad market where nobody is buying? what would happen then besides bad credit fallout if the bank just takes over the house?

HELOC wil follow them out of the foreclosure. It is a cash loan, not a purchase loan.