Can a first mortgage be refinanced to a lower rate if there is also an existing second mortgage?
October 10, 2008 - If a homeowner has a first mortgage and a second mortgage, and would like to refinance the first mortgage at different terms, can this be accomplished - does the existing second mortgage put a monkey-wrench in refinancing the first?
- The second mortgagee has to agree and they won't because there is no advantage to them, they only stand to lose.
Donald has it pretty right on. The only thing I would add is that with the current market conditions, some lender such as Bank of America, are opting not to subordinate. Or, as in our last deal, the borrower had a 110k second and they agreed to subord 56k....my borrower was NOT taking out cash or paying off any debt, so this did not make sense for him.
if the 2nd mortgage holder agrees to subordinate it can be done. heres the situation when u refi, the 2nd mortgage automatically becomes the first, therefore ur new mortgage would be in 2nd lein position, which would be at a higher rate than you are figuring on as no one is going to be in 2nd place without a higher rate, therefore, you must approach the current 2nd holder tell them what u r planning and get them to provide in writing the fact that they will subordinate to the new first mortgage. they can say no, depending on how much equity u r planning on taking out. understand if u default the first mortgage holder get paid first, and the second gets whatever is left, if there isnt enough the 2nd holder takes a risk of not getting all his money back. therefore he may allow you to refi the balance, but not take anymore equity out to say consolidate, use for vacation, or just mad cash, however it doesnt hurt to ask, i have done dozens of loans where the 2nd did subordinate, and only a few have refused to cooperate. gl
- Normally you roll them both together. You can get better rates on a 1st than a 2nd.
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