What happens if you foreclose and you have a home equity loan on the property?

what could happen to you if you foreclose on a property and have a heloc on the property. it is in arizona, would i owe the money still to the home equity loan company,

Quick answer ... NO

The HELOC is subordinate to your first mortgage, Arizona is a state where they can't come after you for the difference. Basically, the lender that did your HELOC will get screwed. the lender in 1st position just wants there money and may recoup from a sale. (Depending on how large your HELOC was)

But whatever the shortfall they WILL 1099 you for the amount they are out, that means that they report it to the IRS as income and guess what ... you owe taxes.

it would be wise to ask a real estate lawyer someone who specializes in this situation as this matter is serious.

there are so many homes available in the metro phoenix area around 50,000 on the mls alone.

a short sale you will owe it as income or 1099 , a foreclosure , which kills your credit, "may" allow to not pay the difference but see an attorney.

Since a HELOC loan uses your home as collatoral, the terms of when the lender can foreclose are written in the terms of your loan.

Basically, when you use anything for collateral the collateral is turned over to the lender (in this case your property) should you miss enough payments.

The lender can not foreclose until the number of missed payments specified in your loan agreement.

HOWEVER!!!!!! Under the law, when a lender makes a loan that requires collateral, foreclosure can be avoided by making a payment on the loan. It is much more difficult for a lender to foreclose on a HELOC.

If foreclosure is threatened the best thing to do is see a lawyer. Since you live in what is called a "common-law" State, Arizona, the ability to foreclose is also constrained by literally hundreds of legal precedents. These precedents have the force of law.

One aspect of "common-law" is that is more difficult for anyone to seize property. This "red thread" as lawyers call it literally goes back hundreds of years to medieval England. At one time Nobility could steal a commoner's land by saying they dreamed their ancestor did not sell the property and their title was a forgery. I am not joking. This is why "common law" when it comes to property has the protections that it does.

you have to pay it back.

If you are a first time borrower of a home equity loan it is imperative that you have a checklist of essential questions that you need to ask each and every lender. The answers to these questions will provide a valuable reference to base your comparisons on. What’s the interest rate? Knowing this is crucial. The interest rate will determinepercentage by which the adjustable rate will change. What is the Annual Percentage Rate or APR? The APR on the home equity loan will determine the yearly payment you will need to make towards this.The higher the payment in terms of points, the lower is the interest rate.