When your first mortgage is paid off, usually by refinancing, your second mortgage will need to be subordinated. This means that the lender will have to gain permission from your second mortgage holder to do a new first mortgage in first lien position. If the lender didn't get a subordination agreement from your second mortgage company - the current second mortgage would fall to first lien position - and obviously have less risk. And the new first mortgage the lender were doing would be in second position - and since the risk is higher - the rate would be higher. This process can help you to avoid any reimbursement of fees for early payoff on your equity loan or line of credit. At the same time it can save you money in the form of fees to establish a new equity loan or line of credit.

The requirements for a subordination review are minimal and are items you have already submitted to your first mortgage loan officer. We simply need to review these items to make a final decision on your subordination request. A final decision is usually given within 3 business days depending on us receiving a complete package of information in a timely manner.

Your first mortgage loan officer should be familiar with subordinations and can help to expedite the process for you by forwarding the requested information. Very few borrowers who take out a second mortgage are aware that the second mortgage lender can prevent them from refinancing their first mortgage. When the existing first mortgage is repaid, the existing second mortgage automatically becomes the first mortgage - unless the second mortgage lender is willing to subordinate his claim to that of the lender providing the new mortgage into which the borrower is refinancing. Policies of second mortgage lenders regarding subordination vary all over the lot, from a small fee and no conditions to absolute prohibition. Borrowers taking a second mortgage should get the lender's subordination policy, in writing, before they close the loan.