What Happens If You Default on a HELOC? (The Honest Answer)

Let's be direct: Yes, you can lose your home if you default on a HELOC.

A HELOC isn't a credit card. It's a mortgage—specifically, a second mortgage secured by your house. If you stop paying, the lender has the right to foreclose and sell your home to recover their money.

That's the scary part. Now let's talk about what actually happens, the timeline you'd face, and what you can do if you're struggling.

Why HELOC Default Is Serious

When you signed your HELOC, you put your home up as collateral. That's what made it possible to get a low interest rate. The lender took less risk because they have a guarantee: your house.

If you stop paying, that guarantee kicks in. The lender can pursue foreclosure to get their money back.

This isn't theoretical. It happens. Maybe not as often as primary mortgage foreclosures, but it happens.

HELOC Default vs. First Mortgage Default: What's Different?

Your HELOC is a second mortgage. It sits behind your primary mortgage in what's called "lien position."

Here's what that means practically:

In foreclosure, your first mortgage gets paid first. If your home sells for less than you owe on both mortgages, the HELOC lender might not get their full amount—or anything at all.

Because of this, HELOC lenders sometimes pursue other remedies before foreclosure:

• Negotiate with you for modified payment plans
• Seek a deficiency judgment (sue you for the remaining balance)
• Charge off the debt and sell it to collectors

That said, don't count on the lender just walking away. They have options, and foreclosure is one of them—especially if there's enough equity to cover their debt.

The Default Timeline: What to Expect

If you stop paying your HELOC, here's the typical progression:

Days 1-29: Grace Period

Most HELOCs have a grace period (often 15 days) before payments are technically "late." You might see a late fee, but serious consequences haven't started yet.

Day 30: First Late Payment

Your payment is officially 30 days past due. The lender reports this to credit bureaus. Your credit score drops—often 60-100 points from a single 30-day late.

Day 60: Second Late Payment

You're now two months behind. More credit damage. Expect phone calls and letters. The lender may offer to discuss options.

Day 90: Third Late Payment

Three months late is a critical threshold. Lenders often start internal reviews for acceleration or foreclosure. You'll receive more urgent communications.

Days 90-120: Acceleration Notice

The lender may send an "acceleration notice" demanding you pay the full balance immediately (not just the missed payments). This is a serious warning.

Days 120+: Foreclosure Proceedings Begin

If you haven't resolved the default, the lender may start foreclosure. The timeline varies dramatically by state:

• Non-judicial foreclosure states: Can be as fast as 60-90 days
• Judicial foreclosure states: Can take 12-18 months or more

Foreclosure Sale

Your home is sold at auction. The first mortgage is paid in full (if there's enough equity). Remaining proceeds go to the HELOC lender. Any leftover goes to you. If there's a shortfall, you may face a deficiency judgment.

Deficiency Judgments: The Aftermath

If your home sells for less than your total mortgage debt, you may still owe money. This is called a deficiency.

Example:

• Home sells for: $300,000
• First mortgage owed: $280,000
• HELOC owed: $50,000
• Total debt: $330,000
• Deficiency: $30,000

In most states, the HELOC lender can sue you for that $30,000 deficiency. If they win, they can:

• Garnish your wages
• Levy your bank accounts
• Put liens on other property

Some states (like California in certain situations) limit or prohibit deficiency judgments. Know your state's laws.

If You're Struggling: Options Before Foreclosure

Don't wait until you're multiple months behind. Contact your lender early. They have options that disappear once foreclosure starts.

Option 1: Forbearance

A temporary pause or reduction in payments. Useful for short-term hardship (job loss, medical issue). The missed payments typically get added to the end of your loan.

Option 2: Loan Modification

Your lender changes your loan terms—lower interest rate, extended repayment period, or converting to fixed payments. This permanently changes the loan.

Option 3: Repayment Plan

Spread your missed payments over future months. Instead of paying the full past-due amount at once, you pay extra each month until you're caught up.

Option 4: Refinance

If you have equity and decent credit (despite the struggles), refinancing into a new loan might work. Your new lender pays off the HELOC, and you get fresh terms.

Option 5: Sell the Home

If you can't afford the payments, selling before foreclosure protects your credit and lets you control the process. You pay off both mortgages from the sale proceeds.

Option 6: Bankruptcy

Chapter 13 bankruptcy can stop foreclosure and let you catch up on payments over 3-5 years. Chapter 7 might eliminate your personal liability for the debt, though you could still lose the home.

Consult a HUD-approved housing counselor. They're free and can help you understand your options. Call 1-800-569-4287.

Credit Impact Timeline

HELOC default damages your credit for years:

The first 30-day late hurts most. After that, additional damage accumulates, but the initial hit is often the largest.

Prevention: Before You Borrow

The best way to avoid HELOC default is to borrow responsibly from the start:

1. Don't max out your credit line - Leave a buffer for rate increases or income changes
2. Understand variable rates - If rates rise 2%, can you still afford payments?
3. Have a repayment plan - Don't rely on interest-only payments forever
4. Keep an emergency fund - Don't use your HELOC as your only safety net
5. Be honest about your budget - Just because you qualify doesn't mean you can afford it

The Bottom Line

Yes, defaulting on a HELOC can cost you your home. It's a real risk backed by a real lien on your property.

But if you're struggling, options exist—especially if you act early. Lenders usually prefer working something out over foreclosing. Foreclosure is expensive for them too.

At HonestCasa, we believe in informed borrowing. Understanding the consequences helps you make better decisions about how much to borrow—and gives you the information you need if things get tough.

Have questions about whether a HELOC makes sense for your situation? Talk to us →

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FAQ

Can a HELOC lender foreclose on your home?

Yes. A HELOC is secured by your home. If you default, the lender can initiate foreclosure proceedings just like a primary mortgage lender.

What happens to a HELOC in foreclosure?

The first mortgage gets paid first from the sale proceeds. The HELOC lender gets paid from any remaining equity. If there's a shortfall, they may pursue a deficiency judgment against you.

How many missed payments before HELOC foreclosure?

It varies by lender and state, but foreclosure proceedings often start after 90-120 days of missed payments. Some states require additional notice periods.

Can I negotiate with my HELOC lender if I can't pay?

Yes, and you should—as early as possible. Options include forbearance, loan modification, or repayment plans. Lenders often prefer working something out over foreclosure.