Wait A Second: My Home Equity Line on My Duplex Is What?

 

One of the challenges facing owners who occupy their duplexes is a common misconception about their home equity line.
 

While a home equity line was a terrific tool useful when it came time to making large repairs or improvements, what most people don’t realize is “home equity loan” is a pleasant term for a second mortgage.
 
What many homeowners don’t know is when it comes time to either sell or refinance the property, this loan has to be paid off. In other words, the amount you need to pay off your entire indebtedness on the duplex is the amount you owe on your mortgage AND your equity line.
 
While to some this may seem obvious, I have run into many people who hadn’t received the benefit of a clear explanation of this fact when they were granted the equity line. These owners are often surprised when it comes time to sell in today’s challenging market, that they owe more than they thought.
 
This presents a problem in that in all likelihood, they can no longer sell the home for the amount it was valued at when the line was granted, thereby resulting in a short sale (where you are short in the amount you owe the bank).
 
If you have a home equity line, and are thinking of selling, be sure to disclose this information to your Realtor. That way, your agent can position your property and work with both lenders for the best possible outcome.