What is tax equity investment?

What happens to my home equity loan if I refinance my primary mortgage with a HARP loan?

• I owe $167,000 on my mortgage and have a $17,000 home equity loan in Illinois. My house was appraised at $213,000 when I bought it about six years ago. A couple of years ago or so I refinanced and the appraisal value held to the same amount. I can't believe it will hold this time. The tax assessor (not market value) has it valued around $191,000 or that ballpark. With HARP I was told that I did not need an appraisal, but I could not wrap my home equity loan into it. With a traditional refinance, I would have to have an appraisal and probably still likely would not get my home equity loan wrapped in with the results of an appraisal (?). My APR would drop 1% with a refinance (primary mortgage). I am not sure how I can get rid of my home equity loan at this point due to circumstances and I was hoping to take care of it through refinancing. Any suggestions? Is it possible to get a loan against a small investment property (house) I co-own (i already have their permission to pledge it) to take care of the home equity?

• Answer:

  Any secondary liens (equity loans, equity lines, or other liabilities secured by the property) would be "subordinated" to the new primary mortgage. HARP gives the flexibility to refinance a primary mortgage that would possibly not be approved with conventional financing due to low/no/negative equity, but the guidelines clearly state that secondary financing needs to be paid off by the homeowner or subordinated. So, as long as the holder of your equity loan is willing, basically nothing would happen to your equity loan. It was still be there, you'd still have payments. But your refinancing bank and the equity bank would agree that your secondary lien would remain in a secondary position. Each bank sets their own rules for this -- some will require you to pay off a portion, or adjust the interest rate or payment schedule. Others will require a full appraisal (even if your refinancing bank doesn't require one). If your goal is to pay off the 2nd, your options are ... 1. Just pay it off with money you already have 2. Apply for, and be approved for, a cash-out refinance on your home (you're close to underwater, so this is not likley unless home values improve) [note: alternatively, you could have a cash-out where you bring some of the cash to pay everything off] 3. Apply for, and be approved for, a cash-out refinance on the investment property to pay off the equity loan on your primary home