Subordination Agreement’s Explained

January 24, 2009
Matt Isleib

 

With interest rates dipping below 5% there has been a spike in refinance applications. There are a lot of homeowners that have second mortgages. While borrowing money below 5% is extremely cheap it does not always mean that it makes financial sense to consolidate your second mortgage into a new first mortgage.

 

For one a lot of people use the HELOC or “home equity line of credit” sparingly and may not max it out. They may pay it off sooner so combining it with a new first does not always mean it is the right choice. And for some people combining the two makes sense in their financial situation.

 

If you fall into the category of people that it makes sense to leave their second mortgages alone it does not mean that you cannot refinance. You can subordinate your second mortgage. What that means is that a request is made to your second mortgage holder asking them to subordinate their position or in other words remain in second lien position on your title. It does not always mean that they will agree to do so. In most instances they will. The subordination allows you to refinance your first mortgage and have it recorded on your title and then the second mortgage holder will still be in “second” position on the title.

 

You have to be approved from the new first lien holder as well as get an Ok from the second mortgage company to subordinate. Once the second company receives the necessary info they need to ok the process you can close on your refinance. Depending on the lender the subordination process can take anywhere from 1-3 weeks.

Applying for and shopping mortgage rates is a click away www.EversleyCapital.com

 

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