How an Existing Line Of Credit Can Affect Refinancing

Many homeowners have a line of credit secured by their home as a 2nd mortgage. When deciding whether to refinance your 1st mortgage, you must decide what to do with the line of credit. Your options include (1) paying the balance off and closing it (2), keeping the credit line in place with the balance unchanged, or (3) keeping the credit line in place with a partial or full pay off of the balance. Options 2 and 3 involve a process called “subordination,” and are accomplished by application with and approval by the current lender. It can take a few weeks, can require that a fee of up to $300 be paid, and can result in the credit line amount being reduced.