As a Mortgage Broker in South Florida (Palm Beach Gardens) I have seen this scenario all to well with my clients. They would like to take advantage of a new lower mortgage and have a Home Equity Line of Credit. Now any lenders including Bank of America will not re-subordinate their HELOC's if your are in Florida.
So what does Re-Subordinate mean?
On the title of your property you have lien positions. Your current mortgage is in first position or first mortgage. When you opened a HELOC on your home that loan went into second position behind your first mortgage. Now when you want to refinance your first your second will automatically be moved into the first position unless the current lien holder on the second will subordinate behind the new first mortgage. In years past this has never really been a problem but with the current housing crisis in Florida plus most of Florida being labeled a "Declining Market" most of the lenders are now not Re-Subordinating anymore.
But I Have Equity
If you have equity more than 20% it will be on a case by case basis. However, please keep in mind the following example of how equity works:
Value of Property 1st Mortgage 2nd Mortgage Balance Credit Line on HELOC
$300,000 $200,000 $50,000 $50,000 (maxed)
This is a very typical Refinance.
The borrower would like to condense the two mortgage into one. The new mortgage would be for $250,000 plus closing costs. If the borrower would leave the second mortgage open even if it had a zero balance it would make for a 100% financing. The reason is the borrower has the ability right after closing to go and take out that money once again.
What If I Don't Pay Off the HELOC?
Even if you don't pay off the the second mortgage or HELOC the lender would still have to approve the new first mortgage.
In closing, if you find yourself searching rates and programs please make sure to find yourself someone who has been recommended or do your home work on the person. Make sure you just don't fill out something online for more information. In most cases these people are not licensed and last week they where doing something else for employment. Make sure you are dealing with a Mortgage Professional.
For more information: Mortgage Advice in South Florida
Full-Time Mortgage Broker in South FL. Palm Beach County. Specializing in Hard Money / Private Money, Foreign Nationals, Jumbo and Super Jumbo Loans. In addition I work with Today's Premiere Lenders.
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At one time Countrywide allowed me to subordinate my HELOC while refinancing my first....not sure if they still allow it with the merger.
Bank of America just let me up my home equity line ( second ) to the max 80 % of value, no closing costs, full appraisal, better rate. I live in a town in Ma that is not declining as fast as other towns in Ma.
Also there was ablog by Katerina Gasset that Country Wide has shut down for 30 days you may want to read.
Neal, In today's market most likely they would not allow such a thing today.
Matt... some good information for the average consumer that might be talking to a broker that doesn't know any better... just trying to get them in the door.
Now, in regards to Karen's comment, about Countrywide.... hhhhmmmm I haven't heard anything. Wonder if it's a specific office? regional?
Karen... I am finding out, but you might want to go back and read what Katerina wrote. Your statement, "Country Wide has shut down for 30 days you may want to read."
I just read it and from what I gather, they are just shutting down their loss mitigation...REO/foreclosure departments, not Countrywide as a whole. I am not trying to sound rude, but you might want to be careful when stating something like this without being specific... and if not sure, not to mention anything at all. From my experience, this is how rumors start... again, just my opinion.
Jeff, So Very True. As for Karen...thank you for clearing that up
Matt, Great information which alot of consumers do not understand. Thanks for the post.
Great post for the consumers! I am one of the lucky ones and still live in an appreciating market...allbeit 2-5%, but some is better than none!
Jacob, My pleasure
Casey, you are very lucky
Hi Matt, this is great information for those that want to refinance.
Keith, Thank you
The changes never stop
The mortgage mess just keeps on giving. Great info Matt.
Charlie, You are so right. They never stop
Jason & Deanna, Thank you
Great post Matt! Very few left that will allow it.
Tom, You are so right very few. Thanks for the comment
Matthew...this is very good information and written very well for the consumer.
Debra, Thank you