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Are You Defaulting on Your Home Loan?

Can a lender make us sell our second home to pay down debt?

I have a home equity loan taken against my primary home in California to pay in full for my 2nd home in Montana. Now I can't afford payment and may default on the loan. Can a lender make us sell our 2nd home to pay down debt?

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Bill's Answer
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Bills.com | Find Learn Save

Unless your home equity loan agreement specifically listed your home in Montana as additional security on the loan, the lender cannot force you to sell your home in Montana to repay the home equity loan secured by your home in California.

However, if you do not make the payments on the loan, the creditor can foreclose on your primary residence in California, which I would think is a larger concern than the prospect of losing your home in Montana.

Foreclosure is a difficult and costly process, both for the lender and the homeowner, so you should try to avoid it if at all possible. Since you own two homes, I encourage you to sell one of the properties to ease your financial burden -- or to refinance and lower the total obligation.

If you want an introduction to pre-screened mortgage lenders, Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page at Mortgage Refinance Quote and find a loan that meets your needs.

You can either sell the second home in Montana to pay off your home equity loan, freeing yourself from the payments on that loan, or you can sell your home in California to pay off your mortgage and home equity loan. Which home you decide to sell will depend on your future plans. If you are planning to move to Montana in the near future, it may be best to sell the home in California and rent until you are ready to move. However, if you plan to stay in California, you should probably sell the Montana home and use the proceeds to pay off your home equity loan.

I wish you the best of luck in resolving your financial difficulties.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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12 Comments

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  • BA
    Aug, 2009
    Bill
    Try to avoid foreclosure if you can. Three ideas in order of impact on your credit score, from least impactful to most: 1) Look at the Making Home Affordable program. It may not apply because you are not residing in the home, but look into this program anyway for ideas on negotiating with your lender on new terms. 2) Consider a short sale. Read more about short sales in my reply to another reader Foreclosure Short Sale. 3) Consider a Chapter 13 bankruptcy.
    0 Votes

  • 35x35
    Aug, 2009
    Doug
    We moved for job related reasons and now own a home that is worth about $130,000 less than what we owe. We are leasing a home in our new location as well as assisting my parents on their home. What options do I have? We have always had good credit, but I have spent $40,000 of my saving in the last 18 months trying to keep current.
    0 Votes

  • 35x35
    May, 2009
    Samuel
    You really need to consult with an attorney who is an expert at foreclosures to see wht your best course of action is. You would ideally do this before your home went into foreclosure, but it's not like the lender can go put a lien on your other property right away, there are several procedures to be followed and only after a court ordered judgment will they be able to do so. As I said, please consult with an attorney.
    0 Votes

  • 35x35
    May, 2009
    Sandra
    I am age 67 in a townhouse in Virginia that I paid $298,000 for in 2003. I had planned to sell in about 5 years when my daughter was able to have me live near her. Now the market is defunct, my house is now worth $112,000 and I have little or no equity. The town houses are being auctioned at $79,000. I need to short sale or default before next year. My brother and I own a house in Tennessee. Should I give my part to my brother so it won't be pulled into the equation? Is there a time limit to do this in oder to protect it from a lien?
    0 Votes

  • BA
    Nov, 2008
    Bill
    Depending on when they initiate foreclosure, the process could take up to a month.
    0 Votes

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