With so many Colorado home owners refinancing because of historic low interest rates, we are seeing more issues with second mortgage liens. Second mortgage liens can come in many forms, including home improvement loans, solar system loans, lines of credit, and tax liens.
All liens have an impact on a mortgage refinance because they will all have to be either paid off or subordinated. Subordinated 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 may not 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 if the homeowner does not keep up payments). Lenders consider a UCC as a second mortgage lien.
At Indigo Mortgage Colorado, we have also seen many home improvements loans that borrowers didn’t realize were a lien. Regardless, a second mortgage or lien will need to be paid off or subordinated. And either of those options will likely mean the interest rate will be higher than if it’s a straight refinance. Basically, a second mortgage creates a higher risk for the lender so that’s why the higher rate.
When you’re ready to refinance your mortgage, contact Indigo Mortgage. Even with a lien, it may be the opportune time to refinance your higher-rate home loan. We’ve been helping homeowners since 2003 and we’ll help make the refi process easy.