Posted on: 20th Jun, 2006 02:33 pm
i want to refinance my first mortgage. i have a second mortgage. now i got approved for it but i found that the second mortgage lender has to be subordinated to a new first mortgage. i could not understand this process. pls help.
Hi Betsy,
At the time of obtaining the second mortgage there was an understanding that when your 1st. mortgage will be paid off, the second mortgage will come into the first place.
So, when the first mortgage is refinanced, you or your lender needs to ask the second mortgage lender to stay in place. This process is subordinating.
Subordinating involves a small underwriting by the second mortgage lender assuring that you still qualify for their mortgage after refinance.
During the subornation procedure they will look at your credit, income and the appraisal. Once approved, a subordination agreement will be sent by them to your refinance loan officer so that they get the evidence that the second lender allowed the refinance.
Blue
At the time of obtaining the second mortgage there was an understanding that when your 1st. mortgage will be paid off, the second mortgage will come into the first place.
So, when the first mortgage is refinanced, you or your lender needs to ask the second mortgage lender to stay in place. This process is subordinating.
Subordinating involves a small underwriting by the second mortgage lender assuring that you still qualify for their mortgage after refinance.
During the subornation procedure they will look at your credit, income and the appraisal. Once approved, a subordination agreement will be sent by them to your refinance loan officer so that they get the evidence that the second lender allowed the refinance.
Blue
Hi Betsy,
A request has to be made to the second mortgage lender to subordinate the loan which means that the new lender wants to be in the first position.
If the second mortgage lender doesn't agree then the new lender needs to refinance the second. Sometimes the second mortgage lenders refuse it.
A request has to be made to the second mortgage lender to subordinate the loan which means that the new lender wants to be in the first position.
If the second mortgage lender doesn't agree then the new lender needs to refinance the second. Sometimes the second mortgage lenders refuse it.
Why will they refuse? One of my friend faced this situation where the second mortgage lender refused to subordinate. I am worried a little for that.
Betsy
Sometimes the second mortgage lenders refuse it though I don't find any sense to it. So long the balance on the first mortgage is increased; the position of the second mortgage is in no way affected by the refinance of the first mortgage.
Since the interest rate will be probably be lower reducing the payment burden so that strengthens the position of the second mortgage if you think it in that way.
The second mortgage lender may charge some extra for the time required to fill out the necessary forms. Don't get worried now. Refusal doesn't take place always. Check with your lender for the copy of the subordination requirements.
God bless you.
For MortgageFit,
Samantha
Sometimes the second mortgage lenders refuse it though I don't find any sense to it. So long the balance on the first mortgage is increased; the position of the second mortgage is in no way affected by the refinance of the first mortgage.
Since the interest rate will be probably be lower reducing the payment burden so that strengthens the position of the second mortgage if you think it in that way.
The second mortgage lender may charge some extra for the time required to fill out the necessary forms. Don't get worried now. Refusal doesn't take place always. Check with your lender for the copy of the subordination requirements.
God bless you.
For MortgageFit,
Samantha
Thanks for the information.
Some borrowers do face this problem. You must be aware that the second mortgage is required to disclose their subordination policy in the Truth in Lending Statement. There will get the idea of the lender's policy from the beginning.
If you find that the lender doesn't allow subordination, and then look for a different second mortgage lender.
I hope you won't face problems this time but do keep in mind from next time.
If you find that the lender doesn't allow subordination, and then look for a different second mortgage lender.
I hope you won't face problems this time but do keep in mind from next time.
Hi,
I have two loans on my home and the first loan is an adjustible one that I am trying to re-do. I have already been approved but the 2nd is refusing to subordinate. They used to but now I am told that they changed their policy in September of this year. I was never infomed of this change. Is this legal ? If not what are my options ?
I have two loans on my home and the first loan is an adjustible one that I am trying to re-do. I have already been approved but the 2nd is refusing to subordinate. They used to but now I am told that they changed their policy in September of this year. I was never infomed of this change. Is this legal ? If not what are my options ?
Hello Susan,
If your second lender says that they have changed their policy and this is the rule then I think you have to negotiate with your first lender and talk to him clearly about the situation. Because if you do not go by their rules then the second lender may call the entire second mortgage balance due immediately.
You should talk to your first lender and see if he is willing to do a refinance.
Feel free to ask if you have any further problem.
If your second lender says that they have changed their policy and this is the rule then I think you have to negotiate with your first lender and talk to him clearly about the situation. Because if you do not go by their rules then the second lender may call the entire second mortgage balance due immediately.
You should talk to your first lender and see if he is willing to do a refinance.
Feel free to ask if you have any further problem.
To qualify for the best rates out there, if the second mortgage was taken out after you purchased the home, then it is considered a cash out transaction. The maximum that you will be able to borrow on a cash out transaction and still get a decent rate is 90% of the home value. You may be exceeding this if they are telling your that you have to subordinate. They should have told you this upfront. If you are asking for a mortgage loan that is less than 90% of your home's value, then I would shop around for a lender that will combine the two together. There are many lenders that will do so.