Selling Your Home With a HELOC: What You Need to Know

Last updated: December 2025

Quick answer

When you sell your home, your HELOC must be paid off at closing. Since a HELOC is a lien on your property, it must be satisfied before ownership can transfer.

Your HELOC is paid from the sale proceeds, and the lender removes the lien once it’s settled.

Selling your home with a HELOC in place

A home equity line of credit (HELOC) is a second mortgage secured by your property. When you sell your home, all liens, including HELOCs, must be paid off in full at closing. You cannot transfer ownership to the buyer until the title is clear of outstanding loans.

The HELOC balance, along with your first mortgage (if applicable), is included in the seller’s closing costs. The escrow or title company handles these payments directly using funds from the buyer or lender.

For homeowners comparing equity options, understanding the differences between HELOCs and home equity loans can clarify how each is treated during a sale.

What happens to your HELOC at closing

Here’s how your HELOC is handled during a home sale closing:

• Your real estate agent or escrow company requests a payoff letter from your HELOC lender
• The total payoff amount includes principal, accrued interest, and any fees
• The closing agent uses your home sale proceeds to pay off the HELOC
• The lender releases the lien from your property title
• Any remaining proceeds are disbursed to you after all debts and closing costs are settled

This process is automatic and typically requires no action from the seller beyond authorizing the payoff.

Can you sell a house if you recently used your HELOC?

Yes. You can sell a home even if you recently drew funds from your HELOC.

However:

• Your payoff balance will include any new charges plus interest
• You may have less net equity after the HELOC is paid off
• Prepayment penalties are rare, but review your loan terms just in case

Drawing heavily from your HELOC shortly before listing your home could reduce your take-home proceeds at closing.

How does a HELOC work?

Real-world example: Selling with a HELOC balance

Let’s say you’re selling a home for $450,000 with the following balances:

In this case, your HELOC would be paid off along with your primary mortgage, and you would receive $110,000 after closing.

Check your HELOC rate in minutes.

Does a HELOC delay the home sale process?

A HELOC does not delay the sale as long as the lien is known and your lender provides the payoff information promptly. Most lenders are accustomed to processing HELOC payoffs at closing.

To avoid issues:

• Disclose your HELOC early to your real estate agent and title company
• Request a payoff letter as soon as you accept an offer
• Avoid drawing new funds from your HELOC during escrow

The title company needs a clear payoff amount to include in the settlement statement.

What if your HELOC balance exceeds your sale proceeds?

In rare cases, your combined mortgage and HELOC balances may exceed the sale price. This results in a negative equity situation, also known as being “underwater.”

Options in this case:

• Bring cash to closing to cover the shortfall
• Negotiate a short sale with your lenders if approved
• Delay selling until you regain equity or reduce the balance

HELOCs are legally binding loans, and you cannot avoid repayment just because the sale price doesn’t cover them.

How to apply for a HELOC.

Closing costs and HELOC payoff process

Your HELOC payoff will be listed in the Closing Disclosure (CD) as a line item under “Payoffs and Payments.” The steps are:

1. The title company requests a payoff statement from your HELOC lender
2. Statement includes daily interest accrual and any final fees
3. The payoff amount is wired to the lender from the sale proceeds
4. Lender issues the Release of Lien, clearing the title

Make sure the lien release is properly recorded with your county post-sale.

Should you pay off your HELOC before listing your home?

In most cases, no. Paying off your HELOC before selling offers no significant advantage, since it must be paid off at closing either way.

However, you may consider early payoff if:

• You want to increase your net equity calculation when negotiating
• You prefer a cleaner title during escrow
• Your HELOC carries high interest, and you’re unsure about the sale timeline

Otherwise, letting the title company handle the payoff at closing is standard practice.

Maximize your equity and move forward with HomeEQ

Selling your home with a HELOC doesn’t have to complicate your closing. As long as your lender provides payoff details, the process is automatic and streamlined.

If you’re planning your next move, now is a great time to understand your home equity options and plan ahead for your next purchase or renovation. Check your HELOC rate in minutes!

Frequently asked questions: What happens to HELOC when selling a home?

Q: Can I sell my house with a HELOC still open?

A: Yes. Your HELOC will be paid off automatically at closing using the sale proceeds. The title cannot transfer to the buyer until all liens, including your HELOC, are cleared.

Q: What if I have a zero balance on my HELOC when I sell?

A: Even with a zero balance, the HELOC lien remains on your title until it is officially closed. It must still be addressed at closing, and your lender will confirm the payoff amount as $0.

Q: Do I need to close my HELOC before selling?

A: No. Your HELOC is closed automatically as part of the sale. The title company handles this during the closing process by paying off the balance and filing the lien release.

Q: Can I transfer my HELOC to my new home after selling?

A: No. HELOCs are tied to a specific property. If you want a new HELOC on your next home, you’ll need to apply for a new one after that purchase closes.

Q: Does my HELOC affect how much I walk away with?

A: Yes. The remaining balance on your HELOC is subtracted from your sale proceeds at closing, just as with your primary mortgage.