Can a home equity loan foreclose on your house?

If you are unable to repay a loan that was secured by your home, such as a home equity line of credit, or HELOC loan, California law generally allows the lender to foreclose on your home to collect the loan.

What happens to your home equity in a foreclosure?

Subscribe to news about Home Loans. Home equity stays the property of a homeowner even in the event of a mortgage default and foreclosure on the home. But the foreclosure process can eat away at the equity.

What happens when you take out a home equity line of credit?

When you take out a home equity line of credit, you pay for many of the same expenses as when you financed your original mortgage. These include: an application fee, title search, appraisal, attorneys’ fees, and points (a percentage of the amount you borrow).

What happens to a HELOC after a foreclosure?

The lower the balance you owe on your HELOC, the less likely your lender is to sue you if you continue to make regular payments. Filing for bankruptcy after the foreclosure process is complete is one way of avoiding your obligation to repay the balance you owe on your HELOC.

When do I have to renew my home equity line of credit?

You should find out if your home equity plan sets a fixed time — a draw period — when you can withdraw money from your account. Once the draw period expires, you may be able to renew your credit line. If you can’t, you won’t be able to borrow additional funds. In some plans, you may have to pay the outstanding balance.

How is a home equity line of credit determined?

A home equity line of credit is classified as a line of credit that is determined by the current state of an individual’s home equity, which is defined as the difference between the amount of money outstanding with regard to a home loan and the amount of money at which the home is valued.

Do you have to have equity in your home to get a HELOC?

Qualifying for a HELOC. To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe.