You can usually refinance your traditional mortgage while you have an HEI, but only on the company’s terms. Most will agree to stay in second place behind a new rate-and-term refinance, and most want to be settled first if you take cash out.
The bigger risk is the lender. Some won’t refinance a home with an active agreement at all, so ask before you apply.
Our take: If you think you’ll want to refinance soon, do it before you sign an HEI. If you already have one, call the HEI company before you call a lender, and ask the lender up front whether it will lend behind a home equity investment.
Two different questions
People mean one of two things when they ask this.
The first is whether you can refinance your traditional mortgage and keep the HEI in place. That’s usually about getting a lower rate or a different term. The second is whether you can use a refinance to settle the HEI, so the company gets paid and the lien comes off.
Both work. They just follow different rules. And if what you really want is cash without touching your first traditional mortgage, that’s a third question, covered in getting equity out without refinancing.
What subordination means
Your traditional mortgage lender wants to be first in line if anything goes wrong. When you refinance, the new loan replaces the old one, and the HEI’s lien could end up ahead of it on paper.
So the lender asks the HEI company to subordinate, which means signing an agreement that keeps the HEI behind the new loan. No subordination, no refinance, unless you settle the HEI.
What each HEI company allows when you refinance
| Company | Rate-and-term refinance | Cash-out refinance | Other conditions |
|---|---|---|---|
| Hometap | Possible if it meets Hometap’s guidelines. Your lender will probably ask Hometap to sign a Subordination Agreement. | Reviewed on your ending equity, which differs from a rate-and-term refinance | Won’t subordinate below 3rd lien position. Needs a physical, lender-ordered appraisal from the last 90 days. No balloon or negative amortization. Approval could take a couple of weeks. |
| Splitero | Doesn’t require payoff, and may subordinate in some cases, like a rate and term refinance with no cash out | Not listed among the cases it may subordinate to | Some lenders may still require you to repurchase Splitero’s option first. |
| Unlock | May subordinate, depending on the refinance type and your home’s value | Requires full settlement before or during the new loan closing | Won’t subordinate to reverse mortgages, shared appreciation loans or negative amortization loans. |
| Point | Can’t take more than $200 cash out or materially raise your balance | Generally means settling Point first | Lenders may not refinance without Point being paid off. |
| Unison | Allowed, with restrictions | Must stay under your Maximum Authorized Debt Limit | The limit is fixed at signing and doesn’t rise as your home appreciates. |
From each company’s own FAQ, help center or blog pages. Your agreement controls, so read its refinancing section.
Notice the pattern? A plain rate-and-term refinance is usually workable. Pulling cash out usually isn’t, at least not without settling first.
Whatever company you’re with, tell it before you start. Hometap asks you to email before you begin with a lender, and Unlock asks you to notify it before refinancing.
The lender problem
Even when the HEI company says yes, your lender might say no.
Unison is blunt about this. It says lenders that follow Fannie Mae and Freddie Mac guidelines may decline your application, since those guidelines don’t allow subordinate financing that shares in equity or home appreciation. Unlock and Splitero both warn that some lenders won’t approve a refinance on a home with an active agreement.
So before you pay for an appraisal, ask the loan officer a simple question: will you lend behind a home equity investment if the company subordinates? If the answer is no, you either find another lender or settle the HEI as part of the refinance.
Unison’s own advice is worth repeating. If you’re thinking about refinancing soon, you may want to do it before you take out an agreement. Our first lien HELOC vs mortgage guide covers another way to restructure a first traditional mortgage.
Settling an HEI with a refinance
This is the most common way people end an HEI without selling. You take a cash-out refinance, a new and larger traditional mortgage, and use the extra cash to settle the company.
Here’s how Hometap runs it. You confirm the amount in its Settlement Calculator, and it sets the home’s current value with an automated valuation or an in-person appraisal. If it’s in person, you pay for it.
Then you ask for a settlement statement with a good-through date, at least 30 days out is its suggestion, and Hometap emails your final payoff and payment instructions. The whole thing typically takes about three weeks. After you pay, it files to remove the lien, which usually takes 7 to 30 days.
Near the end of your term? Hometap recommends starting at least 45 days before the end date.
Heads up: A cash-out refinance resets your traditional mortgage, with a new rate, a new term and new closing costs. If your current rate is low, you’d be giving that up on the whole balance, not just the amount you need to settle.
A refinance-to-settle example
Say you received $50,000 from Hometap on a $500,000 home. Six years later, after 3.25% yearly growth, the home is worth $605,774, and you still owe $230,000 on your traditional mortgage.
| Item | Amount |
|---|---|
| Hometap Share at 18% of $605,774 | $109,039 |
| Remaining traditional mortgage balance (our assumption) | $230,000 |
| New loan needed before closing costs | $339,039 |
| That loan as a share of the home’s value | About 56% |
Example only. The 18% is Hometap’s published percentage for a 10% investment settled in years 6 to 10, and it’s below the Hometap Cap here. Add refinance closing costs, and your lender sets how much it will lend.
At about 56% of the home’s value, the loan size may not be the hurdle. The harder part might be the rate on a $339,039 loan compared with the one you have now.
Get an estimate from Hometap and try different settlement years in its calculator before you sign.
Step by step: refinancing with an HEI
- Read the refinancing section of your HEI agreement.
- Contact the HEI company and say whether you want to keep the agreement or settle it.
- Ask lenders whether they’ll lend behind a home equity investment, before you apply.
- If you’re keeping the HEI, get the company’s subordination requirements in writing and pass them to your lender.
- If you’re settling, request a settlement statement with a good-through date that covers your closing.
- Close the refinance, settle the HEI if that’s the plan, and confirm the lien release.
Other ways to settle besides a refinance
A refinance isn’t the only way out. Hometap and Point both list a HELOC or home equity loan as a way to settle, along with savings and selling the home.
Splitero mentions one more option at the end of a term, which it calls a re-split. You’d take out a new HEI to repurchase the original one. That buys time, but the clock and the cost both start over.
Still shopping? Pick a company whose rules fit your plans, and if a refinance is likely, ask each one how it handles subordination before you sign. Compare the terms in Splitero vs Hometap and HEI pros and cons.
Bottom line
You can refinance with an HEI, but you need both the HEI company and the lender on board. A rate-and-term refinance is often allowed, while a cash-out refinance usually means settling the HEI first.
Bottom line: talk to the HEI company first, the lender second, and get every condition in writing.
An HEI could make sense if you have at least 25% equity in your home, it’s located in an eligible state, and you don’t expect to refinance your traditional mortgage in the next few years.
Refinancing with an HEI, answered
Usually, yes, if the HEI company agrees to subordinate and your lender is willing to lend behind it. A rate-and-term refinance is the easiest to get approved. Contact the HEI company before you apply.
Not for most rate-and-term refinances. Splitero doesn’t require payoff, and Hometap and Unlock may subordinate. For a cash-out refinance, Unlock requires full settlement and Point generally wants to be paid first.
Usually only by settling the HEI as part of it. Unlock requires full settlement before or during the new loan closing, and Point says you’d generally need to pay it first. Point also caps a rate-and-term refinance at $200 cash out.
Some won’t. Unison says lenders that follow Fannie Mae and Freddie Mac guidelines may decline, since those guidelines don’t allow subordinate financing that shares in home appreciation. Ask the lender before you apply.
With Hometap, the settlement process typically takes about three weeks, and it recommends starting at least 45 days before the end of the term. Lien removal usually takes another 7 to 30 days.
Sometimes. Unlock may subordinate to a new HELOC or home equity loan if your total financing stays within the limit in your agreement, typically 75% to 80% for primary residences. Check with your company before applying.
How we put this together
This guide is Banks Done Right’s editorial view. The refinancing rules come from Hometap’s blog posts on refinancing and settling with a refinance, Splitero’s FAQs, Unlock’s FAQs, Point’s help center and Unison’s FAQs.
The example uses Hometap’s published percentage, 3.25% yearly growth and a traditional mortgage balance we picked. We didn’t get quotes from lenders.
| What we looked at | What we checked |
|---|---|
| Keeping the HEI | Each company’s subordination rules |
| Cash-out refinances | Whether settlement is required first |
| Lender appetite | What the companies say about lender approvals |
| Settling | Hometap’s steps, timeline and lien release |
Sources
- Hometap: “Refinancing With a Home Equity Investment”, “Settling Your Home Equity Investment With a Refinance” and FAQs (hometap.com)
- Splitero: How It Works and FAQs (splitero.com)
- Unlock: FAQs on refinancing and new financing (unlock.com)
- Point: Help Center, “Can I refinance my property in the future?” and end of term options (help.point.com)
- Unison: FAQs, “If I choose a Unison equity sharing agreement, can I still refinance in the future?” (unison.com)
Take the next step.
Find out what Hometap could offer you.
Keep reading
GuideEquity Without a RefinanceYour options compared.
ComparisonSplitero vs HometapCredit, term and cost for two common picks.
GuideHome Equity Investment Pros and ConsWhat you gain and what settling could cost.
Terms, pricing and availability change. Check the current terms in your agreement and on each company’s site before you refinance.