Can You Refinance a Mortgage with an Active HEI? Subordination Explained

In this Article

• Can You Refinance Your Mortgage If You Already Have an HEI?
• What Is a Subordination Agreement, and Why Does Your HEI Need One?
• How Does a Rate-and-Term Refinance Differ from a Cash-Out?
• Will Your HEI Provider Actually Subordinate?
• How Do You Get Your HEI Subordinated for a Refinance?
• What Does this Mean for Arizona Homeowners?
• Frequently Asked Questions

If interest rates drop, one worry can stop you before you even sign a Home Equity Investment (HEI): will the investor lock you into your current mortgage forever? The good news is no. An active HEI does not freeze your mortgage rate for good. But to refinance your main mortgage and keep the HEI, you have to clear one specific step, called a subordination agreement. And not every company handles that step the same way.

For the full mechanics of how these agreements work, see the Arizona home equity investment guide.

This guide breaks down how it works, when it matters, and what to ask your HEI company before you start.

Comparing HEI companies before you commit? See our top Home Equity Investment companies.

Can You Refinance Your Mortgage If You Already Have an HEI?

Yes, you can refinance your primary mortgage with an active Home Equity Investment (HEI), but only if the HEI provider signs a subordination agreement.

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An active HEI does not legally prohibit you from refinancing. However, because the HEI provider holds a recorded legal claim (a junior lien) against your property, refinancing introduces a third party to the transaction. Your new mortgage lender will not fund the loan unless the HEI provider officially agrees to remain behind the new mortgage in lien priority.

If the HEI provider approves subordination, your refinance closes smoothly and your HEI remains active. If the provider denies subordination, you must pay off the HEI balance entirely using proceeds from the new loan or personal funds.

What Is a Subordination Agreement, and Why Does Your HEI Need One?

A subordination agreement is a legal document in which a secondary lienholder (such as an HEI company) agrees to keep its payment priority behind a primary mortgage lender.

For a closer look at the lien instrument your HEI provider records, see our full breakdown of how an HEI lien works in Arizona.

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When you secure an HEI, the provider files a deed of trust or mortgage lien against your home to protect its financial interest. In real estate law, liens follow a “first in time, first in right” priority structure:

1. First Lien: Primary Purchase Mortgage
2. Second Lien: Home Equity Investment (HEI)

When you refinance, your original primary mortgage is paid off and satisfied, which temporarily pushes the HEI lien into the primary (#1) position. Because institutional mortgage lenders are legally restricted from issuing primary loans in a secondary position, the HEI company must sign a subordination agreement. This agreement officially moves the new mortgage into the first position and maintains the HEI in second place.

If a HELOC is also already in place, see how a third-position HEI behind a HELOC changes lien priority and subordination.

How Does a Rate-and-Term Refinance Differ from a Cash-Out When You Have an HEI?

The type of refinance you choose directly determines whether an HEI provider will approve your subordination request.

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Refinance Type	Purpose	HEI Subordination Likelihood	Provider Outcome
Rate-and-Term Refinance	Lowers interest rate or alters loan duration without altering total debt.	High	Provider usually signs the subordination agreement and stays behind the new mortgage.
Cash-Out Refinance	Increases primary mortgage balance to extract liquid cash.	Low	Provider usually denies subordination and requires a full HEI buyout at closing.

Rate-and-Term Refinance (The Standard Path)

A rate-and-term refinance simply replaces your existing primary mortgage with a new one that offers a lower interest rate or a adjusted term length. Because your overall senior debt balance remains largely unchanged, the HEI provider’s risk profile does not increase. As a result, most major HEI providers will approve a rate-and-term subordination.

Cash-Out Refinance (The Hard Stop)

A cash-out refinance increases the primary loan amount, eroding the homeowner’s remaining equity cushion. Because higher primary debt increases financial risk for the investor, most HEI agreements restrict or outright prohibit subordination for cash-out refinances. In this scenario, you will be required to settle the HEI in full as part of the refinance closing.

Will Your HEI Provider Actually Subordinate?

Whether an HEI provider will approve a subordination agreement depends on the specific contract guidelines of that company.

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Before starting a mortgage application, check your provider’s written policies regarding lien subordination:

• Hometap: Features a defined process for handling subordination requests. Hometap requires homeowners to notify their support team before initiating a refinance so they can review the Closing Disclosure and issue subordination paperwork.
• Point: Requires pre-approval for all secondary financing or refinancing. Point typically permits subordination for straightforward rate-and-term refinances within specific Combined Loan-to-Value (CLTV) thresholds, but restricts cash-out transactions.
• Splitero: Offers a unique Maturity Match™ feature that aligns the HEI agreement duration with your remaining primary mortgage term. While this prevents premature maturity pressures, you must still request formal subordination approval if you replace the underlying mortgage.

If aligning your HEI with your mortgage is important to you, Splitero could be a fit. See if you qualify with Splitero →

How Do you Get Your HEI Subordinated for a Refinance?

The process is mostly about speaking up early and letting your HEI company and title company handle the paperwork. Done in order, it usually adds a step, not a wall:

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1. Tell your HEI advisor on day one. Let them know you have an HEI or shared appreciation agreement on your home before the paperwork gets going. Finding out late is how closings fall apart.
2. Ask your HEI company for their subordination packet. Every company has its own forms and rules, so get theirs early.
3. Send over your Closing Disclosure. This is the form that lists your final loan terms. The HEI company checks it to make sure your new loan isn’t much bigger than expected.
4. Sign at closing. The title company records your new mortgage and the subordination document together, so everything lands in the right order.

What Does this Mean for Arizona Homeowners?

For Arizona homeowners who secured historically low mortgage interest rates in 2020 and 2021, understanding subordination is critical to protecting long-term wealth.

Across Phoenix, Scottsdale, and the surrounding East Valley, many homeowners tapped their surging home equity using HEIs while leaving their primary 2.5%–3.5% mortgage rates intact. If macroeconomic rates drop and refinancing becomes advantageous, navigating the subordination process allows local homeowners to secure lower primary mortgage terms without being forced into an premature HEI buyout.

Curious if an HEI makes sense for your situation? You can pre-qualify in minutes without impact to your credit. Check Your Eligibility →

Refinancing a Mortgage with an HEI: Frequently Asked Questions

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