How Do HELOCs Work?

Here’s how a HELOC can help you buy a home and sell another simultaneously.

Today I’m going to let you in on a little secret that we’ve been using to help our clients who need to sell one home while also buying another. This tool helps you get the home you want on your timeline, and keeps the process rolling smoothly. It’s called a home equity line of credit, or HELOC, and I’m excited to tell you all about it today.

Many homeowners have massive amounts of equity in their properties these days, but they can’t use that equity until they sell their homes. If you need to sell a home while you’re buying one, you’re a much weaker buyer. The seller you're buying from won't wait around for you.

However, a HELOC can help speed up the process and make you a much stronger buyer. Let's say you have a home worth $1 million, and you owe $400,000 on the mortgage. That means you have $600,000 in equity. You can use a HELOC to take that $600,000 out and buy your next house. We can usually get a HELOC for 85% to 90% of your home’s value. You could probably get $800,000 in credit on that $1 million home. 

"When you buy with a contingency, you’re going to end up paying more."

After you use the HELOC to buy your new home, we can sell your old property, pay off your mortgage, pay off that HELOC, and get you into your new home with a lot less trouble.

Another great thing about HELOCs is that they are typically interest-only payments. You’re not paying principal, interest, etc. like you would on a standard loan. You’re just paying interest until you pay the loan off completely, which would presumably be after you sell your current home.

HELOCs will also help you purchase your next home at a much lower interest rate. When people buy homes with contingencies, they’re having to pay a lot more for homes. With a HELOC, we can get homes for lower prices because you’re essentially a cash buyer.

If you have any questions about the home equity line of credit, buying a home, or real estate in general, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.

Here’s how a HELOC can help you buy a home and sell another simultaneously.