A HELOC while your home is listed for sale
Your home is listed and your down payment is locked inside it. Most banks won't open a line on a home that's for sale. Some programs will, and the line is simply paid off when the home sells.
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Can you get a HELOC while your home is listed for sale?
Yes, you can get a HELOC while your home is listed for sale, but only with a program that allows it. Most banks decline listed homes because they expect the line to be paid off within months. With the right lender, you draw the next home's down payment, make a non-contingent offer and pay off the line from your sale proceeds at closing.
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Why most banks say no
A HELOC is priced to stay open for years. When a bank sees a listing, it expects the line to be paid off almost immediately, so it earns little and still pays to open it. Many banks also check the MLS during underwriting and stop the file the moment a listing appears. That's a policy, not a judgment about you: the same home and the same borrower can qualify with a lender whose program allows listed properties.
Use a free calculator, or get your HELOC rate from Shawn.
Your options for buying before you sell
| Sale contingency | Bridge loan | HELOC on the listed home | |
|---|---|---|---|
| Strength of your offer | Weak; many sellers reject it | Strong, non-contingent | Strong, non-contingent |
| Typical cost | None, but you may lose the house or pay more | Higher rate plus 1%–2% fees | HELOC rate; interest only on what you draw |
| Speed | n/a | Weeks | Days to a couple of weeks on digital programs |
| When the old home sells | Purchase proceeds | Bridge loan paid off | Line paid off at closing |
| Main risk | Losing the next home | Cost if the sale drags | Two housing payments until the sale closes |
How it works, step by step
- Check your equity. Home value times the program's combined loan-to-value limit, minus your mortgage, is roughly what you can draw. Run your numbers.
- Apply with a program that allows listed homes. Tell the lender up front that the home is listed. Hiding it can sink the file late.
- Draw the down payment. The new lender will want to see the HELOC funds move into your account, so keep the statements.
- Buy without a sale contingency. Your agent can negotiate on price and terms instead of asking the seller to wait on your sale.
- Close on your old home. The title company pays off the HELOC from your proceeds, along with your first mortgage.
Qualifying for two payments
The lender on your new home will count your current mortgage, the HELOC payment and the new mortgage unless the old home is under contract or a program allows otherwise. That's the main hurdle. If the numbers are tight, ask whether the new lender will exclude the old payment once you have an accepted offer on the old home, or compare a bridge loan program that ignores the departing home's payment.
Example
A homeowner lists a $900,000 home with $300,000 left on the mortgage. At an 80% combined loan-to-value limit, a line of up to $420,000 is possible. She draws $180,000 for a 20% down payment on a $900,000 replacement home, makes a clean offer and moves once. At 7.75% APR, interest on the $180,000 runs about $1,160 a month. If her old home closes three months later, she has paid about $3,500 in interest, and the line is paid off at closing.
What to plan for
- A slow sale. Budget for six months of both payments, not two. Price the home to sell.
- Early-closure fees. Some lines charge a fee if closed within the first few years. Ask before you open it, since you'll close it quickly.
- Rate type. Some digital programs fund a fixed-rate draw; others are variable. Either is fine for a few months; know which you have.
- The listing price. Lenders value the home by appraisal or automated valuation, not your list price.
For listing agents
A seller who can buy first can list sooner, hold out for the right offer and skip the sale contingency on the next purchase. Agents who want a quick read on a client's equity can work with Shawn directly.
Also asked
Will a HELOC on my listed home hurt my sale?
No. The buyer never sees it. The title company pays the line off from your proceeds at closing, the same way it pays off your mortgage.
Can I open a HELOC before listing my home instead?
Yes, and if you have time it's the easiest path, since any lender will consider it. Open the line a month or two before listing, then draw when you find the next home.
Can I get a HELOC if my home is already under contract?
Usually not. Most HELOC programs, including those that allow listed homes, won't open a line once the home is under contract, since the sale is weeks away. At that point, ask the new lender about excluding the old payment instead.
Can a HELOC on my listed home fund an investment property purchase?
Often yes. A HELOC draw on your listed home can fund the down payment on any next purchase, including an investment property. What matters are the program rules for the home you're selling.
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Sources
Official sources behind this guide.
- What is the difference between a home equity loan and a HELOC? · Consumer Financial Protection Bureau
- What you should know about home equity lines of credit (booklet, PDF) · Consumer Financial Protection Bureau
- Regulation Z §1026.15: Right of rescission · Consumer Financial Protection Bureau