Can you refinance just your 1st mtg and not your HELOC?

picture121 · Joined: 21 Sep 2008 Posts: 7 6.13 Dollars($)

We would like to do a cash-out refinance on our investment property. However, in today's market, we are afraid the appraised value will not support the cash-out we need. The home has 2mtg's. First is a 5/1arm that matures in 2010 for approx $400k- so we have to do something about that soon. The second is a HELOC also adjustable for approx $90K. We need $40K cash-out to pay off debts. My question is: Can we just refinance the 1st MTG with cash - out and not the HELOC.? This way the Loan amount would only have to be about $440K and it would be ok if the appraisal came in a little lower? We think the value is between $650k and $675k.
Any advice is appreciated.

Guest

Hi picture121 !

I think the lender will agree to this. However, it is the discretion of the lender as to what he will do or whether he will agree to this.

Posted: Mon Sep 22, 2008 6:34 am Post subject:

You can do this if the 2nd mortgage lender is willing to subordinate. Typically they aren't too crazy about doing subordination agreements on cash out refis, not to mention you may be pushing their loan to value threshold for investment property.

gmakerley · Posted: Mon Sep 22, 2008 7:16 am Post subject:

i have to agree with guest's assessment of the situation. in this environment, you are far less likely to obtain approval of resubordination of a second lien in general; let alone in a situation that sees you getting additional cash out. you are making the second lienholder's position worse - i suppose there are some lenders out there who'll capitulate, but they are fewer and farther between than ever before.

Guest

Are they not already in a subordinate position? I thought the 1st MTG co. has precedence over the second anyway- esp. in case of foreclosure. Also, suppose I want to keep that Line of Credit open?

Posted: Tue Sep 23, 2008 6:08 am Post subject:

Once the the first loan is paid off the mortgage will be released and a new mortgage will be recorded for the new loan - thus putting it in 2nd position as it will be recorded behind the heloc, this is why a subordination is necessary to keep the heloc in 2nd position.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.07 Dollars($)

The 2nd mortgage lender will NOT agree to a subordination when there is cash out taken on the first mortgage since this reduces their securitization of the second mortgage.

However, there could still be an option for you here. You could refinance the first to take cash out and do a new second line of credit to give you the low rates that are currently available on the line of credit product. I think this would be the best way to accomplish this. You would effectively be very close in attaining the same result as you are seeking.

Guest

It would be easier to ask the current HELOC lender to increase their line of credit than to subordinate. You will not get cash out on an investment property or get the subordination. You have a better chance at increasing the line, which is free.

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