What is to subordinate home loan?


To subordinate a home loan means that a lender holding a primary lien requests a junior lien lender to stay in subordinate position while the primary lien holder is restructuring (refinancing) their lien.

For example, if you have a first mortgage and you wish to refinance it without paying off the existing second mortgage or line of credit you also have. The second lien holder has the right to move into first lien position if:

  • The first mortgage refinance does not pay off the existing second lien or home equity loan or line of credit;
  • No subordination request is made from the part of the primary lien holder to the second mortgage holder to remain in junior position while the refinancing is over.

Subordinating your home equity loan will keep it open and available while refinancing your first mortgage, and maintain lower home equity rate; also, subordination fees are much smaller than the costs of opening a new line of credit, once closed.

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