At a home sale
The closing agent obtains payoff information and uses sale proceeds to satisfy applicable liens before the owner receives remaining proceeds.
An open line may need to be frozen or closed so additional draws do not change the payoff.
During a first-mortgage refinance
The new first lender needs the required lien position. The HELOC may be paid off, closed or subordinated with the HELOC lender’s approval.
Subordination is not automatic and may add documents, conditions or time.
Payoff treatment can affect the transaction type
Under conventional guidance, paying off certain non-purchase subordinate financing through a new first mortgage can cause the transaction to be treated as cash-out even if no additional cash is received.
The source and history of the second lien matter.
Plan before applying
Obtain a current balance and ask whether the line has an early-closure or recapture provision. Tell both lenders about the intended structure at the beginning.
Legal questions about title or lien priority require qualified legal guidance.