Homeowner Discovers $50,000 HELOC From Prior Owner During Refinance Attempt

A recent refinance application in the U.S. revealed a significant undisclosed financial liability tied to a residential property. The current homeowner, who had purchased the home in a prior transaction, discovered a $50,000 home equity line of credit (HELOC) established by the previous owner. The HELOC was not disclosed during the original sale or in public records accessible through standard title searches, despite being active and reported to credit bureaus. The issue emerged when the homeowner applied for a new mortgage to consolidate debt and lower interest rates. Lenders require a comprehensive title report and credit history as part of underwriting. During the review, the lender flagged the HELOC, which had been opened under the prior owner’s name and remained unpaid. The loan was secured against the property, meaning it created a lien that could affect the current owner’s ability to refinance or sell without settling the debt. This case highlights critical gaps in property transaction due diligence. While the current homeowner is not legally obligated to repay the debt unless they assume it, the unresolved HELOC complicates future financing and could impact the property’s market value. The lien remains on record until cleared, and resolving it may require legal action or negotiation with the former owner. Financial institutions and title companies are now emphasizing the need for more rigorous pre-purchase checks, including deeper lien and debt verification beyond basic public records. Real estate professionals advise buyers to conduct comprehensive title examinations and request full loan history documentation from sellers.