Refinancing options when you already have a home equity loan in your home

When you have a home equity loan in your home, refinancing your current mortgage loan is often a tricky endeavor. Usually, a home equity line of credit won’t be repaid through refinancing. According to the liens on the property, that establishes who has right to more money in case the homeowner defaults on the mortgage and declares bankruptcy, they are reported chronologically. The home equity loan would be considered as the first lien, and the mortgage would become the second lien. This often becomes a deal-breaker for obtaining a mortgage refinancing. One needs to petition the bank that holds the home equity loan for subordination to second lien, which is necessary to refinance your mortgage during such a situation. Here are some steps that you can take in order to refinance when you already have a home equity loan on your property.


1. Contact the bank who holds the mortgage: The foremost step that you need to take is to contact the bank that holds the mortgage loan on your property and inquire about the options of refinancing your mortgage. You need to be aware that refinancing might as well trigger some clauses regarding pre-payment penalties and the refinancing fees may even reach 3-6% of the principal amount that is outstanding on the loan. You may be subject to this even when the equity is strong. This way you can find the best deal among the lender and at the same time also compare the costs of refinancing before taking the final plunge.

2. Get a printed copy of the appraisal: Next you need to get a copy of the refinancing appraisal after you’ve negotiated with your bank and you’ve come to know about the terms of refinancing. This is required to be presented to the bank that is holding the home equity loan during the process of subordination.

3. Obtain a subordination request: You will easily get a subordination request form from the bank that is holding your home equity loan. Only by submitting this title, you can’t consider that the home equity loan will become subordinate on the title mortgage loan; you also have to let the bank consider the subordination request.

4. Submit the paperwork: Submit all the paperwork that is necessary for the bank to reconsider your subordination request. You should give enough time to the bank to process the request before the deadline for the rate lock on the new mortgage refinance loan. Inquire with the bank that holds the home equity loan how long they will take to consider the subordination request so that you can contact the refinancer of the mortgage.

Therefore, when you’re wondering about the prospects of taking out a refinance mortgage loan while having a home equity loan, you can take into account the above mentioned options. Make sure you consider the pros and cons of the entire process before taking the final plunge. Shop around and get multiple quotes from multiple lenders so that you may choose the best rate in the market.