If you have a KeyPoint Loan or Line of credit and are thinking about refinancing your first mortgage, you should know about a plan called subordination. By subordinating your home equity loan or line of credit – rather than paying it off as part of your refinance – you could save yourself time and money.
Refinancing your first mortgage doesn't mean you have to payoff and close your home equity loan or line of credit with KeyPoint Credit Union. As an alternative, you may be able to subordinate your Home Equity Loan or Line.
The Relationship Between First And Second Mortgages:
- A first mortgage is a financial lien against your home. It is in the "first" position – that is, the first loan to be paid when you sell or refinance.
- A second mortgage – such as a home equity loan or line of credit – is in the "second position." Normally, once you pay off your first mortgage, the second mortgage lender moves into "first" position.
- Paying off the first mortgage (which you would do with a refinance) does not automatically pay off the "second" position loans. Therefore, homeowners often roll the payoff of their home equity loan (second mortgage) into the amount they refinance, which means that refinanced amount includes a payoff for the second mortgage.
- An alternative to paying off your Home Equity Loan or Line is to request a subordination agreement. This means you will refinance only your first mortgage, and KeyPoint Credit Union agrees to remain in the “second” lien position after the refinance is completed.
- This agreement allows the lender that refinances your first mortgage to assume “first” lien position on your title.
- If you qualify, you are able to refinance your mortgage and keep your home equity loan or line of credit open. This offers you several advantages.
How Subordination Benefits You:
- Maintain your low home equity loan rate and don’t exchange it for a higher rate that might apply to your mortgage refinance.
- Avoid fees that may be required if you pay off your equity loan or line of credit early.
- Avoid potential fees required to establish a new home equity loan or line of credit.
What You’ll Need To Subordinate Your Home Equity Loan or Line:
- The documents that KeyPoint Credit Union needs to review for a subordination request are the same ones you have to fill out to apply for your mortgage refinance.
- KeyPoint Credit Union will review these documents and determines if subordination is a good option for you.
- We can usually let you know within 21 days after we receive the necessary papers that you have been approved for subordination.
- Your first mortgage loan officer should be familiar with subordinations and can speed your subordination request by sending us the documents we need.
Learn more about the benefits of Home Equity Subordination Program. Email us or call (408) 731-4170.