Refinancing Existing Home Equity Loan And Then Selling The House
Question: Here’s my situation and I’d appreciate any comments you guys may have.
I am presently looking to buy a new home in the next several months and am on the border for being able to qualify for the loan amount required to buy the type of house I am looking for. The limiting factor (based on the calculators at the mortgage loan websites), is my monthly payment on a home equity loan I am making for my existing house.
If I refinance this home equity loan, I could lower that payment by about $300 per month and would then be looking good for qualifying for the loan amount for the new house.
Question: Is this do-able? Can I refinance a home-equity loan, which is based on the value of my existing home, and then in a few months sell that home? Does the lender even care if the home is still owned by me as long as they get their payments?
Thanks in advance…
Answer: We haven’t seen enough information from the OP to determine how much equity they actually have, or don’t have.
I’ve got a 100,000 dollar equity line of credit on our home with only 25,000 of that being owed (used). I could refinance that to get a lower percentage rate and subsequent lower payment, then sell the home the next day if I wanted to.
As long as the sale price is high enough to pay off both the 1st mortgage and equity line of credit (in that order), I’d pocket the balance, after closing costs of course. No lender is going to care one iota *beyond* them being paid off, nor do they have any right to.
The only potential problem would be if the equity line of credit lender overvalued the property *and* the OP used every cent of it prior to the sale. In that case they’d either have to wait until the actual market value increased to, or above the level of debt, and/or pay down the equity line of credit accordingly.
Most lenders are pretty damned careful these days to keep in line with current market value.
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