Can I subordinate my first mortgage and refinance?

Guest 0.10 Dollars($)

I have bought a home a year ago with 80/20 financing. The first mortgage is a 2/28 ARM. Shortly after I bought the home, the housing market fell down and I'm afraid hat the value of my home must have dropped.

Can I consider my first loan as the subordinate and refinance it just when the loan is expected to adjust? Is it possible to do so without affecting the second loan.

Guest 0.10 Dollars($)

If the housing market isn't doing well, I think it's better to refinance into lower rates. Otherwise, if you are unable to pay off the ARM, you may have to sell the home in order to make the payments. And, if the market isn't doing well, then you will not be able to pay the lender from the sale proceeds.

helping_user

Welcome Andrews.

You cannot subordinate your existing first loan to any other loan taken against your home. But you can refinance the first loan even though there is a second mortgage on your home.

Whether you can go for the refinance, will depend upon how much you have paid off or how you are managing the second loan. Your credit profile has to be good enough and you need to check the loan documents as to whether you need to pay any prepayment penalty due to the refinance.

I had a friend who has once taken a 2/28 ARM as his lender suggested that would be ok for him since he got a bad credit rating from the former. Usually what happens is, the borrower refinances at the end of 2 years during which he tries to build up his credit. But you have come along only a year or so; you still have some time so that you can analyze your finances and decide upon your loan options for the refinance.

Thanks.

miller_st · Joined: 17 Jan 2007 Posts: 917 168.82 Dollars($)

Hi Andrews,

Before going for a refinance check the rate you will be getting and whether it will be beneficial to refinance the present mortgage or not. Refinancing the first loan won't have any affect on the second mortgage. It will continue for its term.

Miller

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