Central Ohio Mortgage Loans: Resubordination

Resubordination can hamper refinance:

Many borrowers have recently come across a similar situation.  You locked in a very competitive interest rate for a refinance only to run into a problem with a resubordination.

If you have an equity loan or line of credit the equity lender must approve the new refinance.  This can cause a myriad of problems and can delay the closing for a month or more or stop the refinance altogether.

Resubordination comes into play when a homeowner wants to refinance a primary mortgage and keep the current second.  Before this can happen the current home-equity lender must agree to let the second mortgage remain where it is, in second position.  That agreement is a resubordination.

Lenders who hold these seconds would prefer you to pay them off and close out the lines to improve their balance sheets.  If you are considering a refinance and have an equity line be aware of the following issues:

• Closing a new first with an equity line can trigger delivery fees
• The current equity line holder can require addition fees the first mortgage holder is not charging.  I.E.  Union Savings does not charge title insurance on conventional refinances however if you want us to subordinate you will have to pay full title insurance
• Waiting for a subordination can endanger a rate lock
• Many times the lender doing the resubordination will lower the equity line as a condition of the resubordination

Please be aware of these issues when you are considering a new mortgage or equity line.  If you have any questions regarding resubordinations or refinancing please contact me at your earliest convenience.