what does it mean to subordinate my 2nd mortage before refinancing?

Hi Cindy, Subordinating a second mortgage means that your second mortgage holder would agree to remain in second lien position on your home, rather than take over first lien position when your current first mortgage is paid off. This allows you to refinance the first mortgage while leaving the second as is. Lien position means the order in which loans are paid off if a home is foreclosed upon. The lender you are obtaining a new first mortgage with will want to be in first lien position on the home, so they request your second mortgage holder to "subordinate" or remain behind them in order. I hope that answers your question, please post here or email me if you need any more clarification or if that was unclear.

Second mortgage does not get paid off, and remains in second position.

When you refinance your first mortgage but you're not paying off your 2nd, then the new lender requires the 2nd mortgage to allow for re subordination. Part of the agreement you signed when you took out your 2nd mortgage says that if you pay off your 1st, then the 2nd automatically becomes a first position loan.. since you cannot refinance your current mortgage into a 2nd position loan, the new lender requires the 2nd to re subordinate. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

When you refinance your first mortgage but you're not paying off your 2nd, then the new lender requires the 2nd mortgage to allow for re subordination. Part of the agreement you signed when you took out your 2nd mortgage says that if you pay off your 1st, then the 2nd automatically becomes a first position loan.. since you cannot refinance your current mortgage into a 2nd position loan, the new lender requires the 2nd to re subordinate. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Mortgages are entered into county records by date. Most people have a big loan, then sometime later took out a smaller second mortgage (HELOC). So while you may have two mortgages, when you refinance, many times only the big one is getting paid off. While you are getting a new big loan, the moment the current big one is paid off, the smaller second now moves into first lien position because it is dated and recorded earlier than your new big loan. Your new big loan lender doesn't like that. Therefore they ask the current second lien hold to sign a subordination agreement, whereas it says they will agree to go back into second position, allowing the new big loan to be in first lien position. Hope that helps.. In MN or WI, visit www.JoeMetzler.com for all your mortgage needs.

Hi Cindy - Imagine that the banks that loaned you money have to get in line to be paid back. When the home is sold or otherwise transferred - the 1st mortgage loan gets paid all of their money 1st, the 2nd mortgage loan 2nd and so forth down the line until all the money runs out at which time the seller will get what's left over. Any time a new loan is added, they have to get in the back of the line. Therefore, when you refinance and payoff the loan that is currently 1st in line, the lender replacing this old loan wants to be in the front of the line instead of behind the bank in the 2nd position. So, before the new lender agrees to pay off the current 1st loan, they require the 2nd mortgage lender agrees to him cutting line and being in front.