Q: My wife and I purchased our home a couple of years ago, with 10 percent cash down, a $417,000 first mortgage and a $77,000 home-equity line of credit. We would like to refinance our first mortgage to take advantage of today's low interest rates, but the holder of our line of credit refuses to subordinate. We feel this is unreasonable. After refinancing, the payments on our first mortgage would be reduced significantly; with the lower payments, we are less likely to default, thereby making the lender's position more secure. Our home has appreciated slightly, so we cannot understand why the lender would believethey would be in a worse position. Is there anything that can be done when a lender unreasonably refuses to subordinate a line of credit?
A: In today's difficult economy, lenders have tightened their loan requirements.
Let's look at what subordination involves. You have a first trust of $417,000 and a home-equity line of credit for $71,000. You put down 10 percent, so by my calculations you paid about $550,000 for your home.