Can I Transfer My HELOC to Another Property?

A home equity line of credit (HELOC) allows homeowners to borrow against the equity in their home. It works like a credit card, with a set credit limit and interest rate Many people take out HELOCs to fund home improvements, consolidate debt, or access cash in an emergency.

But what if you want to move? Can you transfer an existing HELOC to a new property?

The short answer is maybe. Here’s what to know about transferring a HELOC to another home.

How HELOCs Work

With a HELOC, you can borrow up to a certain percentage of your home’s value minus your mortgage balance. This is your available credit.

As you pay back what you borrowed, that credit becomes available again, to use as needed. So you can borrow, repay, and reborrow up to your credit limit.

HELOCs have variable interest rates, which means the rate can go up or down over time. They also come with draw periods (usually 10 years) when you can access the funds, and repayment periods when you have to pay back what you borrowed.

HELOCs use your home as collateral. If you default, the lender can foreclose.

Benefits of Transferring a HELOC

Why would you want to transfer an existing HELOC instead of getting a new one? There are a few potential advantages:

• Avoid fees: Opening a new HELOC comes with application fees, appraisal fees, and sometimes closing costs. Transferring the line saves on these expenses.

• Keep your rate: HELOC rates are low right now, but they fluctuate. Locking in your current rate could mean a lower long-term cost than starting fresh with a new lender.

• Retain your credit history: How long you’ve had credit open impacts your credit score. Keeping the line open preserves this record.

• Access available funds: Transferring moves your existing credit line and what you still owe to the new property. With a new HELOC, you’d start back at $0 available.

How to Transfer a HELOC

If you want to transfer an existing HELOC to a new home, start by contacting your lender. Transferability depends on their policies.

Many lenders will let you transfer the line if you meet certain criteria, like:

• Having enough equity in the new home to support the credit line
• Having a certain loan-to-value ratio on the new property
• Meeting debt-to-income requirements based on your current income and debts
• Having a credit score in an approved range

You’ll likely need to provide updated financial details and information on the new property. There may also be fees for processing the transfer request.

If approved, the lender will essentially reopen the line of credit secured by the new home. This takes your credit history with you and maintains your current interest rate and terms.

When Transferring a HELOC Doesn’t Work

While many lenders do permit HELOC transfers, limitations apply. For example:

• Property type: Some lenders restrict transfers to certain property types, like single-family homes.

• Loan seasoning: Some require that your HELOC has been open for a certain period before allowing a transfer.

• Location: The lender may not handle mortgages in the area where your new home is located.

• Lender policy: Not all lenders have transfer options at all. Yours may not allow it.

If your lender won’t let you transfer the HELOC, you’ll have to get a new one with the new property as collateral. Just be aware you’ll be starting fresh with fees, rates, and an empty credit line.

HELOC Transfer Alternatives

What if your goal is accessing your equity to buy the next home? A HELOC transfer isn’t your only option. Some alternatives include:

• Cash-out refinance: Refinance your current mortgage for more than you owe and take the difference in cash.

• Home equity loan: These provide a one-time lump sum you repay over time.

• Personal loan: An unsecured personal loan doesn’t use your home as collateral.

• Retirement savings: You may be able to use IRA or 401(k) funds for a home purchase, within certain limitations.

• Bridge loan: Designed to bridge the gap between closing on your new home and selling your old one.

Each option has its own pros, cons, rates, fees, and qualifications. Do your research to find the most suitable equity access plan for your situation.

The Bottom Line

Transferring an existing HELOC to a new property lets you maintain your credit history, current rate and terms, and available credit. But not all lenders permit transfers. If yours doesn’t, you’ll have to open a new HELOC secured by the new home. Explore all your home equity options to find the best fit.

When selling a house with a Home Equity Line of Credit (HELOC), the outstanding balance on the HELOC must be paid off. This is typically done during the closing process, using the proceeds from the home sale. If the sale price is sufficient, the HELOC is paid off, and any remaining funds go to the seller.