Mortgage Subordination Agreement 2026: HELOC Refinance Essential
Michael Chen
Mortgage Refinance Specialist | 16+ Years Experience
Published: January 21, 2026 | Updated: January 21, 2026
🔄 CRITICAL: Don't Pay Off Your $50K HELOC!
Refinancing with a HELOC? You DON'T have to pay it off! Subordination agreement costs $500-2,000 vs $50,000+ HELOC payoff. Here's how to keep your HELOC and refinance your first mortgage at lower rates.
What Is a Mortgage Subordination Agreement?
A subordination agreement is a legal document where your HELOC lender agrees to remain in "second position" (second lien) when you refinance your first mortgage. This allows you to refinance without paying off your HELOC.
💡 Why This Matters
Without Subordination: You have $300K first mortgage + $50K HELOC. Want to refinance first mortgage to lower rate. Lender says: "Pay off the $50K HELOC first." You need $50K cash to refinance.
With Subordination: HELOC lender signs subordination agreement ($500-2,000 fee). They stay in second position. You refinance first mortgage WITHOUT paying off HELOC.
Subordination saves you $48,000-49,500 in cash!
🎯 Refinance Without Paying Off HELOC
How Lien Priority Works
📋 Understanding First vs Second Lien:
First Lien (First Mortgage):
- • Gets paid FIRST if you default/foreclose
- • Lowest risk for lender = lowest interest rate
- • Example: Your original $300K mortgage at 7%
Second Lien (HELOC/Second Mortgage):
- • Gets paid SECOND (only after first lien satisfied)
- • Higher risk for lender = higher interest rate
- • Example: Your $50K HELOC at 9%
The Problem: When you refinance your first mortgage, the NEW loan becomes first lien. Your HELOC automatically jumps to first position (because original first mortgage is paid off). New lender says: "We need to be in first position. Pay off the HELOC or get subordination."
⚠️ Why Lenders Care About Position:
If you default and home sells for $250K, first lien gets paid fully ($250K). Second lien gets $0. That's why second lien lenders charge higher rates - they take more risk. New refinance lender MUST be in first position to offer you competitive rates.
Subordination Agreement Process
Step 1: Apply for Refinance
Tell your new lender you have a HELOC. They'll request subordination as part of refinance approval. Provide HELOC account number, current balance, lender contact info.
Start Refinance Application →Step 2: New Lender Requests Subordination
Your new lender sends subordination request to HELOC lender. Includes: new loan amount, terms, appraisal, proof you're current on payments. HELOC lender reviews (2-4 weeks).
Step 3: HELOC Lender Approves (or Denies)
Approved: HELOC lender signs subordination agreement. Charges $500-2,000 fee. Agreement filed with county recorder.
Denied: You must pay off HELOC to refinance. Or cancel refinance.
Step 4: Close on Refinance
With subordination in place, you close on new first mortgage. HELOC stays in second position. You keep access to HELOC funds. Pay subordination fee at closing.
Compare Refinance Lenders →Subordination Agreement Cost 2026
| HELOC Lender | Subordination Fee | Processing Time | Approval Rate |
|---|---|---|---|
| Bank of America | $500-750 | 2-3 weeks | High (90%+) |
| Wells Fargo | $750-1,000 | 3-4 weeks | High (85%+) |
| Chase | $500-1,000 | 2-3 weeks | High (90%+) |
| Credit Unions | $300-600 | 1-2 weeks | Very High (95%+) |
| Online Lenders | $1,000-2,000 | 4-6 weeks | Medium (70%+) |
Pro Tip: Credit unions typically charge lowest fees and approve fastest. If you have HELOC with credit union, subordination is usually smooth.Big banks charge more but still reasonable.
When HELOC Lenders Deny Subordination
❌ Reason #1: Combined LTV Too High
Example: Home worth $400K. New mortgage $320K + HELOC $50K = $370K total debt. CLTV = 92.5%. Most lenders cap at 85-90%.
✓ Solution: Pay down HELOC to $30K. New CLTV = 87.5%. Or get higher appraisal.
❌ Reason #2: Late Payments on HELOC
Problem: Any 30-day late payment in last 12 months = automatic denial. HELOC lender won't subordinate if you're risky borrower.
✓ Solution: Wait 12 months from last late payment. Or pay off HELOC to refinance.
❌ Reason #3: Cash-Out Refinance
Problem: You want to refinance $300K mortgage into $350K (take $50K cash out). HELOC lender sees this as risky - you're increasing debt.
✓ Solution: Do rate-and-term refinance only (no cash out). Or pay off HELOC with cash-out proceeds.
❌ Reason #4: HELOC in Default/Frozen
Problem: HELOC is frozen (lender reduced credit line due to home value drop) or you're in default. Lender won't subordinate troubled loan.
✓ Solution: Cure default, bring current. If frozen, may need to pay off HELOC to refinance.
🛡️ Get Expert Help with Subordination
Subordination vs Paying Off HELOC
✅ Subordination Agreement
✓Cost: $500-2,000 fee
✓Keep HELOC: Access to funds remains
✓Timeline: 2-4 weeks processing
✗Risk: Denial possible (10-30%)
❌ Pay Off HELOC
✗Cost: $50,000+ (full HELOC balance)
✗Lose HELOC: No more access to funds
✓Timeline: Immediate (no waiting)
✓Guaranteed: 100% approval
Best if: HELOC balance is small ($10K-20K), or you don't need HELOC anymore, or subordination denied.
Alternative: Roll HELOC into New Mortgage
If subordination is denied or too expensive, consider cash-out refinance to pay off HELOC:
📊 Cash-Out Refinance Example:
Benefits:
- • Lower blended rate: 6.5% vs 7.43% weighted average
- • One payment instead of two
- • Save $200-300/month
- • No subordination hassle
Frequently Asked Questions
Ready to Refinance Without Paying Off Your HELOC?
Get subordination agreement for $500-2,000. Save $48K+ vs paying off HELOC. Compare rates from 50+ lenders.
Get Your Refinance Quote →✓ Subordination assistance ✓ Keep your HELOC ✓ Lower rates ✓ No obligation
Disclaimer: Subordination agreement availability, fees, and approval vary by HELOC lender. This guide provides general information. Consult with your refinance lender and HELOC servicer for specific requirements. Subordination is not guaranteed - HELOC lender has right to deny based on their criteria.