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A lot of Orlando homeowners have both a first mortgage and a second mortgage or home equity line of credit. A few years ago 80/20 loans were very popular, where 80% of the home's worth was borrowed with a first home loan, and the remaining 20% was borrowed with another mortgage. This allowed 100% financing without paying private home loan insurance, and was commonly offered by banks and mortgage lenders throughout the country. A second home loan or home equity line may also be taken out after the purchase in order to take advantage of the equity in a home without refinancing. This too was an extremely common practice in recent years as property prices climbed quickly in many parts of the US.

Today's low Orlando mortgage rates have many homeowners interested in refinancing. In case you're among the many with a second mortgage you may be thinking, what will happen to that loan during the refinance?

Normally you have two choices: pay off the second mortgage or subordinate it.

The first option involves taking out one larger mortgage which will pay back both your existing first and second mortgages. 100% funding is tougher to come by these days, so you most likely need to have some capital in the home to qualify for one mortgage with a higher loan amount.

The second option, subordinating the second mortgage, suggests that you simply keep the loan active and refinance just the first mortgage. Even if you are eligible for a mortgage that would pay off the second loan in addition to the first, you may prefer to hold onto it due to an especially low interest rate, or to retain an open equity line you can tap into if needed in the future. In order to subordinate the loan the lender who holds the second mortgage must concur to take second lien position, which means they would be repaid after the holder of the first home loan in the event of a foreclosure.

A lot of second mortgage lenders will agree to a subordination and provide the subordination agreement required to move forward with the refinance. It can however take some time to receive so this should be accounted for when planning the time line of your Orlando refinance.

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