Are you planning to refinance your current mortgage to take advantage of low mortgage rates but have a Home Equity Loan or Line of Credit you don't want to lose?
It is a common misconception that you must close your Home Equity Loan or Line of Credit in order to refinance your current mortgage. While some loan programs may require Home Equity Loans or Lines of Credit (subordinate liens) to be closed, others programs may be willing to allow borrowers to keep these open pending the existing lender's approval.
By default, when a first (or primary) mortgage closes, the subordinate lien (a Home Equity Loan or Line of Credit) will move into the first position. As most primary mortgages are for a higher dollar amount, the loan programs require that they acquire the first position. To enable this to happen when you refinance your primary mortgage, the new lender must request that Home Equity Loan or Line of Credit will subordinate to their new lien.
Okay, enough of the technical talk. If you find yourself in the position where you plan to refinance your mortgage and want to keep your Home Equity Loan or Line of Credit open, ask your Loan Officer to request a Subordination Agreement. You may be able to take advantage of a new low rate on your mortgage while keeping your Home Equity Loan or Line open, which often times avoids repayment of closing cost fees.
As always, feel free to be in touch if you have any questions.