Many HELOC borrowers are surprised when they’re turned down for mortgage refinancing programs. Why are banks sending them away? Because a growing number of HELOC / second mortgage lenders are refusing to subordinate their loans (agree to be paid after the primary lender in case of foreclosure).

The Chicago Tribune reports:

“Find out if your second lender will subordinate to your first lender. If you have a first and a second mortgage (also known as a home equity loan), find out whether the second lender will subordinate to the new first lender. That will allow you to refinance your first mortgage, while leaving your second loan in place. Many second lenders will not agree to this, and if yours doesn’t, you may not be able to refinance at all unless you pay off the second loan.”

In past years, HELOC lenders almost always agreed to subordination. But, now that foreclosure rates are so high, many are trying to force potential refinancers to pay back their second mortgages early.

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HELOC Questions and Answers

Tags | Heloc, heloc subordination, home equity line of credit, refinancing