Question 1

Can you refinance with a subordinate lien on your property?

Accepted Answer

Yes, you can refinance with a subordinate lien on your property, but your new first mortgage lender will typically require the existing junior lien to subordinate to the new loan or be paid in full at closing. The subordinate lienholder must agree to move behind your new first mortgage in priority, which they're not obligated to do.

Question 2

What happens to a subordinate lien in foreclosure?

Accepted Answer

A subordinate lien gets paid only after the senior lien is satisfied from the foreclosure sale proceeds. If there's not enough money left after paying the first lien holder, the subordinate lenders receive partial payment or nothing at all, which is why subordinate mortgage holders face higher risk and charge higher interest rates.

Question 3

Does a subordinate lien affect your credit score?

Accepted Answer

A subordinate lien itself doesn't directly affect your credit score differently than any other debt—what matters is whether you make payments on time. However, the debt-to-income ratio from subordinate loans like home equity lines of credit can impact your ability to qualify for new credit or refinance existing home loans.

Question 4

Can a lienholder refuse to subordinate their lien?

Accepted Answer

Yes, a lienholder can refuse to subordinate their lien, and they're not legally required to agree to subordination unless it's specified in your original loan terms. This refusal typically happens when subordination would significantly increase the lender's risk, such as when your new loan amount is much larger or when you have limited equity in the property.

Question 5

How long does the subordination process typically take?

Accepted Answer

The subordination process typically takes two to six weeks from the initial request to final approval, though timelines vary significantly by lender. Large national banks often take four to six weeks, while smaller credit unions may process subordination agreements in two to three weeks, which is why starting the process early is critical when refinancing.

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