2nd mortgage question?

Question

What does this mean...ask them if you can subordinate the 2nd mortgage to get out of an ARM that is getting ready to adjust

Answer 1

You have 1 loan.  You add a 2nd loan.  If you refinance the 1st loan, it will go away. It would normally be replaced by the new 1st loan.  But not in your case.  When the 1st is paid, the 2nd now slides down to 1st place.  That is the law.  You need to beg them to go back to 2nd place.  They like 1st place a lot better than 2nd place.

Answer 2

this is a difficult situation as most lenders that have second mortgage position have tightened their requirements.  Basically what you have right now is the arm loan in first position, and the home equity in second lien position (meaning if you default, the lender who holds the arm loan has first dibbs to the property and the lender who holds the second lien has to wait to claim whats left).  If you refinance the arm, the home equity (2nd) would move to first lien position.  the new lender will not like this, they will want the lender who holds the second to subordinate the lien and put the new lender in first position.  The problem that is occuring is something called tltv or cltv (total loan to value), if your over 90%, the lender holding the second lien most likely will not subordinate.  also be aware that this will cost you at least $200 out of pocket and another 10-50 to record the subordination.  It can also take 2-4 weeks to process as the lender who is subordinating will want to see the new lender approval letter and the appraisal.  If your over on the cltv, see if the home equity lender will modify and subordinate, meaning redo the second mortgage, requiring you to pay down the lien until your under 90%.  Hope this helps and good luck