Resubordination And Refinancing of Second Mortgage
At the time of trying to refinancing the mortgage having a home equity or home equity line of credit makes many complications in the process of approval. As the second mortgage lender is legally entitled to move into first place at that time first mortgage refinancing, lender has to be agree to leave that place to the refinance lender. If someone is unable to do such deal it is called resubordination and he has three options;
- He can pay off the second mortgage.
- He can associate both of the loans with the lender of second mortgage.
- He can forget about the refinance altogether.
Mostly refinancers prefer to choose the resubordination process although it’s take time and sometimes also involves fees. According to Home Affordable Refinance Program and HARP resubordination rules are different for every loan. At the time of having a home equity loan or home equity line of credit refinancing a mortgage can be a slow process and because of its mind desensitizing process it is known as resubordination. Basically resubordination is an agreement which keep the second or subordinate mortgage in a second position if the first mortgage is refinanced. As well as second mortgage is also known as a home equity loan or home equity line of credit. In the refinancing process if the lender do not want something to happen then first mortgage would not be refinanced and without the resubordination agreement second mortgage would automatically move towards the first mortgage.
Some people remove the “re” and just call it subordination. When someone has a mortgage and as well as an equity loan the closing is inferior of the primary mortgage which means that the mortgage is in second line. If the homeowner goes towards the foreclosure then he would be responsible to pay the full primary mortgage before that the penny goes to pay off the secondary loan. When mortgage is to be refinance mostly new lender want to put the primary mortgage in first and after that equity loan. But it cannot happen till than the equity lender agrees to be second in line and this point resubordination comes. The process of resubordination enables the first mortgage lender to be sure at the time of refinancing to maintain the first claim on the property.
- In the process of resubordination the first mortgage is kept in the first place leading other mortgages.
- When the first mortgage is refinanced the lender insists the homeowner for resubordinating the home equity loan.
- The equity lender is not responsible to resubordinate.
- If the mortgage amount is almost equal to the total amount of home then the equity lender will not recommend resubordination.
Second mortgage refinancing is much easier than the first mortgage. More overly the equity loan or line of credit refinancing should be done to save money over the loan. There are a number of points that should be kept in mind when trying to refinance the second mortgage. Some of important points are;
- Second mortgage should be pay back.
- Both mortgages should be strengthening by the second mortgage lender.
- Drop the idea of having your second mortgage refinanced altogether.
These points should be kept in mind because refinancing of home equity line of credit further complicate the process of second mortgage refinancing and make the all approval process more. The holder of second mortgage must agree to refinance the first mortgage and when the first mortgage is refinanced it should be handover to the refinance lender. Reaching on this point mortgage holder receive an agreement which is known as resubordination. Although resubordination process is time consuming and costly but most of the refinancers choose this path. But in the case of resubordination process some of rules originated by Home Affordable Refinance Program (HARP) should be followed.
- Two man things should be kept in mind at the time of second mortgage including financial position at the time of second mortgage and financial position if the second mortgage is refinanced. It should be considered that if you refinance the second mortgage, how much more money will you have available to pay bills or save? Refinancing your second mortgage will take some effort and may include additional fees, so make sure that the refinance will be financially advantageous.
- Make sure you are in a good financial position. Start by pulling your credit report. If you find any mistakes, discuss them If there is negative information on your report that may be dragging down your credit score, do your best to get it fixed.
- Find at least three lenders who can offer you information on how to refinance a second mortgage using one of their programs. Get rate information and details about loan terms and lending fees.
- Use your findings to decide upon which second mortgage refinance is best for your situation. The offered interest rate should not be your sole consideration. Ask about fees, closing costs, prepayment penalties, and any other factors that may influence your decision.