what happens in a home equity default when the 1st mortgage is current?

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If I can not pay a home equity line of credit with one bank but I continue to pay the 1st mortgage what action does the home equity line of credit holder take? Both loans are up to date, but I will be unable to pay the HELOC much longer. I do not live in the property in question. It is vacant and with a realtor but it is in Florida and the value is dropping almost daily due to the crisis in the real estate market in florida. Should I let the banks forclose?

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  1. Reply
    ScottMortgageExpert
    May 2, 2011 at 7:45 am

    You never want to let them foreclose on you, period. I am sure you still have equity in your home. You should try and sell or refinance, and yes, they still will refinance you with those late payments. What you need to know if what your home is worth and what you owe on the two loans total. If you could refinance the two together and get one loan and a lower rate/payment, you should be fine. If you are not going to pay one of them, I think the 2nd is what not to pay, but that payment is probably much less, right?

    I just realized you said it was vacant with a realtor and CONTRARY to what many think, you CAN refinance even if a property has been listed for sale lately. Just change the status to cancelled or withdrawn and talk to a mortgage broker that knows the business well. Even vacant homes can be refinanced. I would suggest trying to refinance and have your realtor list this for rent. I am sitting on a vacant home in Cape Coral FL that I already did a cash out refinance on and it has been vacant almost a year. It sucks to use the equity in the home to keep it going but it is better than getting late payments and/or foreclosure.

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