Home Equity Loan On A House For Sale

Can you refinance or get a home equity loan on a house that is currently for sale?

5 Answers

You cannot refinance or get a home equity loan on a house that is currently for sale. The property will need to come off the market for the financing to be done.

Due to the condition of the current housing market, many lenders are changing their requirements. Many lenders had a requirement on refinances that a house could not have been listed for sale within the last 3 to 6 months.

With houses staying on the market longer and people taking their homes off the market for financial reasons, many lenders will refinance a home as long as it is taken off the market.

You want to look at a couple different options as many of these lenders will require a pre-payment penalty if the house has been on the market in the last six months.

You would be hard pressed to find a lender who will refinance your mortgage or give you a home equity loan on a home that is currently for sale. While lenders have different policies on the subject, a lender is going to be cautious about lending money on a property that you don't plan on owning in the near future because that property is how they guarantee that they're money will be returned to them. Some lenders go beyond even this and refuse to refinance or give a home equity loan for a set period of time after a home has been up for sale. That means that even if you take your home off of the market, you may not be able to get a loan until that period of time is up.

Why would someone who is in the middle of trying to sell his home want to refinance or take out a home equity loan anyway? The most likely answer is if the home is not moving as quickly as they would like, they may consider making it more appealing, and that takes cash. Since most of his cash is probably tied up in a down payment for a new home, he sees using the current home's equity as a good option.

The best way to do this is to obtain refinancing or a home equity loan before you put your property up for sale. Have a real estate agent or professional home stager look over your home and let you know what will need to be done before you put the house up for sale. Then you can get the loan and have the improvements made before listing your home.

Some borrowers may be worried about having to pay high monthly payments with a new loan, but that doesn't have to be the case when refinancing or securing a home equity loan before you sell your house. Since in theory you will be making back all of the money you borrowed from the increased value of your home, many borrowers take out an interest only loan before selling. That way they only pay the interest on the loan for a couple of months before the house sells, and they can pay the entire loan back at time of sale. This saves the owners from having to pay several high monthly payments before the sale of their house.

I can only speak of residential loans in Texas. Most lenders require that your home be off MLS for at least 6 months before being able to do a home equity loan. I only know of one bank (US Bank) that allows you to do a home equity loan in Texas after being off the market for 1 day.

Due to the housing market collapse lenders are changing their guidlines to accomodate sellers who cannot sell and need to refinance. Seek out an experienced mortgage broker that is aware of the new underwriting guidelines. Each state is different so do your homework before you decide to use. Be sure to ask for testimonials and have them explain exactly how they are paid.

You can use the more normal types of finance, including lines of credit, etc., but the class (or term) for loans that are made exactly to do so is called "bridge loans" or "bridge financing". Generally because it bridges you from one to the other property. (If you are doing this to have the funds to close on a second property, you can sometimes arrange financing that essentially will cover both, with the first one dropping off at sale, called a blanket mortgage).

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I think that this is not possible because generally loan companies don’t lend money on house that is currently for sale. In some cases some home equity loan lenders require that the home be off MLS for at least six months just before being able to do a home equity loan. You should get all the details from lenders about the particular case.

According to me most of the time you cannot refinance or get a home equity loan on a house that is currently for sale. If your house is listed for sale within the last 3 to 6 months, then few loan companies can consider your home equity loan request.