With so many home owners refinancing because of historic low interest rates, we are seeing more issues with second mortgage liens. Second mortgage liens can come in a variety of forms, such as home improvement loans, solar system loans, lines of credit, and tax liens.
All of these will have an effect on a mortgage refinance because they will all have to be either paid off or subordinated. That means the when the first mortgage is refinanced, there is an agreement to keep the previous second mortgage in place, in the second position.
Many times, borrowers don’t even realize there is a second lien on their home, especially with solar system loans. The solar company may tell the homeowner it’s not a lien but a UCC (an agreement between the solar company and homeowner, that allows the solar provider to repossess the panels). That UCC is considered a second mortgage lien.
At Indigo Mortgage, we have also seen many home improvements loans that borrowers didn’t realize were a lien. In any case, a second mortgage or lien will need to be paid off or subordinated. And either of those options means the interest rate will be higher than a straight refinance. Basically, a second mortgage creates a higher risk for the lender so that’s why a higher rate.
When you’re ready to refinance your mortgage, contact Indigo Mortgage. We’ve been helping New Mexico homeowners since 2003 and we’ll help make the refi process easy.