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Subordination Fee

Mark Cappel
UpdatedMay 20, 2024

Who should pay for a mortgage subordination fee?

I am refinancing my first loan. The bank has to submit papers to my second loan bank for subordination. My first bank wants me to pay the subordination fee. The second bank tells me that the borrower (me) should not have to pay that fee. Who is responsible for the subordination fee?

Normally when a first mortgage is paid off the second moves into the first position unless the holder agrees to "subordinate" the second. A subordination agreement is an instrument that allows a first lien or interest to be paid off and allows another first mortgage company to come in and be the first priority lien holder.

It is very common for the borrower to pay subordination fees. The second mortgage belongs to the borrower and most likely it is the borrower requesting to keep it open. Most banks handling a refinance would rather you pay-off the second mortgage rather than subordinate.

If you are still shopping for a mortgage refinance, visit the mortgage refinance savings center for no-cost quotes from up to four pre-screened lenders.

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Mortgage market: a pulse check

It is expected that mortgage rates are subject to change. Homebuyers and those refinancing their mortgages should pay close attention to the latest mortgage rate

Mortgage rates April 10, 2024
According to Freddie Mac, the 30-year mortgage rate for the week of April 10, 2024 is 6.88%. This represents a 6 basis points increase from the previous week's rate.
Note: A basis point is equal to one-hundredth of one percent (0.01%). In numerical terms, if the mortgage rate changes by 20 basis points, it means the rate has changed by 0.20%.
According to Freddie Mac, the 15-year mortgage rate for April 10, 2024 is 6.16%. This is a 10 basis points increase from last week’s rates.

What does the mortgage rate mean for you?
Mortgage rates play a vital role in determining your monthly payment. Let's take a look at the avergage interest rates (APR) for April 14, 2024 based on Zillow data for borrowers with a high credit score (680-740) in the United States:

  • For a 30-year conventional loan, the interest rate is 7.09%.
  • If you opt for a 15-year conventional loan, the interest rate stands at 6.29%.
    Using the rates mentioned above, a $279,082 30-year-year mortgage would result in a monthly payment of $1,874. On the other hand, a 15-year mortgage would require a monthly payment of approximately $2,399.

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AAlex, Sep, 2020

We are in the process of closing on a VA IRRRL refinance, involving the subordination of a HELOC. The lender agreed to the subordination and we submitted the request to our secondary lender to whom we paid $350.upfront and directly. Comes closing day, we sign the documents and realize afterward, that the title company has charged us $350. for subordination charges. I recognize the requirement for the secondary lender fees, but is customary for the title company to require additional fees, or are they double billing through an internal error of some kind?

BBetsalel Cohen, Sep, 2020

This sounds like a double fee. The title company might charge a minimal fee for registering the subordination. 

BBonnie, Mar, 2011
My husband and I have a first and second mortgage, the first is at 7.5% with BOA and the second is with Specialize Loan Servicing at 9.8%. We tried to refinance our home for the 'lower interest rate' and paid all fees for appraisal, application and then, since the market is slow, a subordination fee to the second lender. The process was at the Title company ready to be closed when BOA requested a THIRD appraisal, 8 months into the refinance. Because of a foreclosure that sold some 8 miles from our home, the appraisal on our home came in $25,000 lower than the other appraisals and the refinance was DENIED unless we came in with the additional cash.Can we get ANY refunds for the money that we extended during this FRAUD????
BBill, Mar, 2011
Consult with a lawyer in your state who has experience in civil litigation or consumer law. The key questions are: 1. Was the third appraisal reasonable under the circumstances? 2. Was the decrease in the appraised value reasonable given that the comp used was 8 miles away? In an urban or suburban area, that really seems like an unreasonable comp. However, if you live in a more rural area, it may be perfectly reasonable 3. Was the foreclosure sale 8 miles away one of the mortgage servicer's?

From my perspective, the important bits of information to learn are, was the servicer really fishing for a reason to kill the deal, and did it know of the nearby foreclosure?