What Happens If You Can Not Pay Off Home Equity Loan In Sale ?  

With the real estate bubble bursting, more and more people are trying to sell off their properties to pay the amount that they owe on mortgages. It has been noticed primarily with people who have a home equity loan. Many of these people want to know what happens if they cannot pay off the home equity loan in sale.

If the loan was taken during the term of the primary loan after building some equity on the house, it most probably would be a recourse type of loan. In case you are selling your home in order to pay off the second loan, it is important to find out whether the home equity loan is a recourse type or non-recourse type of loan. Knowing this is important as the recourse type of loan means that the lender can still pursue you for the remaining amount if you are unable to pay off the home equity loan after selling your home. While in a non-recourse type of loan, this is not possible.

When a lender pursues the amount that is not paid via the sale of the house, he has issue the person a Form 1099. This means that the amount is reported to the income tax authorities as an income and the person has to pay income tax on it. However, if home equity loan was taken to purchase a vehicle or to make home improvements, then the loan provider has the authority to chase the borrower to recover the remaining amount due on the loan.

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What Happens If You Can Not Pay Off Home Equity Loan In Sale




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