Re: Refinance - Posted by John Corey
Posted by John Corey on March 14, 2006 at 09:14:04:
Looking at the bigger picture will answer the first part of your question.
Liens have a priority based on when they are recorded against the property in most cases. Property taxes for a future year are superior but lets skip that for a minute.
So, if there is a 1st and a second that means that the lien securing the first note was recorded earlier or prior to the 2nd.
Lets assume you pay off the first note. The lien securing the lien will be retired. Then the second lien slides into first. As a new loan would be newer than the already recorded 2nd you can not take out a loan to pay off the first if you expect that new loan to be recorded in first position.
One exception to this model is when the 2nd has a subordination clause. The clause says the lender agrees that their position can be subordinated or made junior to a new lien (loan). Most seconds would not have such a clause as lenders on seconds do not want to be subordinated. The few that will agree are doing so because they were somehow motivated (better rate, terms or something else to compensate the lender).
It might make sense to get a new 1st and second or just a new first that pays off the existing 1st and 2nd. Or it might make sense to get a new 2nd to pay off the second.