HELOC & Foreclosure

A lender will advance you funds for a home equity line of credit (HELOC), which is based on the equity you have in your property. You can lose your home to foreclosure if you miss payments.

Equity Calculation

Lenders usually advance funds for a HELOC based on 75 percent of the property appraisal value minus your first mortgage balance.

Purpose

HELOCs can be used for just about any purpose, including loan consolidation, home improvements, vacations and tuition expenses.

First Mortgage

If you are not current with your HELOC, your first-mortgage lender can start foreclosure if payments are past due.

Deficiency Balance

Once a foreclosure has been completed, you could be responsible for any remaining deficiency balance, depending on your state of residence.

Time Frame

A foreclosure can damage your credit file. This information remains on your file for seven years.

References

• The Federal Reserve Board: What Is a Home Equity Line of Credit?
• Consumer Credit Counseling of Orange County: What Is Foreclosure?