The Quick Read: Usually, but only if the investment provider cooperates or gets paid off at closing. A home equity investment (HEI) is a claim on your home that typically sits behind your first mortgage. A new first mortgage has to take first position. So the HEI is either repaid from the refinance or formally moved behind the new loan, subject to lender guidelines and full file review.
What Is an HEI, and Why Does It Matter to a Lender?
An HEI is a deal where an investor gives you cash today in exchange for a share of your home’s future value. You usually make no monthly payment. Settlement comes later, as a lump sum tied to what the home is worth then.
Refinance savings and break-even estimate
The starting figures are an example value with a balance in proportion and a placeholder for costs. Replace them with yours, and enter the current rate from your statement.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $245,000 current balance, a current rate you enter and a remaining term seeded at twenty-five years, closing costs seeded at $5,000 as an editable placeholder (not a fee quote) and rolled into the new loan, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The new rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a refinance quote; a refinance is priced by the lender at lock, and the current rate, the remaining term and the closing costs are figures you enter. The current payment is estimated from the balance, the current rate and the remaining term; the break-even divides the closing costs by the monthly saving and ignores the interest effect of a longer term. On the VA IRRRL the funding fee is added to the loan unless the veteran is exempt. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages; Lendmire is a broker, never the lender.
Here is the catch for a refinance. A lender doesn't care what the contract calls itself. It cares whether the claim is recorded against your property. If it is, it is treated as a subordinate lien, meaning a claim that ranks behind the first mortgage.
Whether your HEI is a recorded deed of trust, a lien, or an option-style memorandum depends on the contract and your state. Title work answers that question, not the marketing name.
No agency rule names HEIs directly. Fannie Mae, Freddie Mac, HUD and the VA have general rules on junior liens, and lenders apply those rules to HEIs. So the treatment you get is lender and investor policy built on lien rules, not a published HEI rulebook.
Two Different Refinances, Two Different Answers
People mix these up, so keep them separate. In the first, you refinance your mortgage and the HEI stays. In the second, you refinance to pay the HEI off.
| Factor | HEI stays in place | HEI paid off at closing |
|---|---|---|
| Provider's role | Must agree in writing to move behind the new loan | Accepts a payoff at settlement value |
| Likely loan type | Rate-and-term possible if the lien is subordinated | Likely treated as cash-out |
| Leverage test | HEI counts toward combined LTV | New loan must cover the payoff |
| Main risk | Provider declines to subordinate | Larger loan, tighter leverage cap |
Combined LTV (CLTV) is your first mortgage plus every other lien, divided by the home's value. The Fannie Mae Selling Guide says the lender counts all subordinate liens in that figure. An HEI that is recorded counts.
Can the Refinance Leave the HEI Where It Is?
Sometimes. The provider has to sign a resubordination agreement. That is a document where the HEI company agrees its claim stays behind your new first mortgage. Then it gets recorded.
The same Fannie Mae guide section says title insurance does not replace this step. That is the weak point. A provider can say no, or attach terms.
There is one exception. Where state law keeps an existing junior lien in its junior position, the resubordination requirement may not apply. Which states work that way is not something to assume. Your loan officer and title company confirm it.
If the provider refuses, you have two choices: pay the HEI off through the refinance, or wait.
What Happens If You Pay It Off With the Refinance?
Paying off a second lien that wasn't used to buy the home generally makes the refinance a cash-out refinance, even if you take no extra cash. An HEI is usually not purchase-money. So expect cash-out treatment. The guide doesn't name HEIs, so confirm that with your lender.
This matters because the leverage ceilings differ. Across the wholesale programs available through Lendmire, a rate-and-term refinance on a one-unit principal residence is written to 95% LTV. The ceiling is 97% only where the existing loan is agency-owned and the first-time-buyer program allows it. A conventional cash-out on the same home tops out at 80%. Two- to four-unit principal residences, second homes and investment property are capped lower, at 75% for cash-out. The Fannie Mae Eligibility Matrix shows the cash-out and occupancy caps. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Those rate-and-term figures test the first mortgage on its own. If an HEI stays in place, the lender adds it, so the combined total, not 95%, is what has to fit. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Cash-out also carries seasoning. The first mortgage being paid off must be at least 12 months old, and a borrower has to have been on title for six months, with a few exceptions. All of it is subject to lender guidelines.
Picture a homeowner with a primary residence and an HEI settlement that would eat a large slice of equity. A rate-and-term refinance with the HEI left in place might have fit within the program's limits. Cash-out at 80% might not leave room to pay off the HEI and the old mortgage. That is the real question to ask early: does the home's value support the payoff at the lower ceiling? Terms depend on the lender's guidelines, the property type, the leverage, and a full review of the credit profile.
Does Your Loan Program Change the Answer?
Yes. Government streamlines are stricter about other liens.
VA IRRRL. The VA's interest rate reduction refinance must become the first lien. Per the VA Lenders Handbook, any second lienholder must agree to subordinate, and IRRRL proceeds can't pay off liens other than the existing VA loan. If the HEI provider won't subordinate, the path is a VA cash-out refinance with full underwriting, or waiting.
FHA Streamline. The existing loan must already be FHA-insured and current, and the refinance needs a net tangible benefit, meaning a real, measurable improvement for you. HUD's Streamline page also limits cash back to $500. Whether FHA would accept an HEI payoff is a question to put to the lender before you plan around it.
Conventional. Both routes above are open. The provider's cooperation, the CLTV and the cash-out classification decide which fits.
(One more honest note: both streamlines normally skip or lighten the appraisal, but the HEI contract still uses its own valuation at settlement. You may be looking at two different value numbers.)
How to Check Whether Your Contract Allows a Refinance
Read the contract before you apply. Some agreements treat a refinance as a settlement trigger. Others let you refinance and keep the HEI. Look for:
- Settlement triggers. Sale, end of term, refinance, or a specific payoff request.
- Refinance language. Whether you need written consent, and whether the provider must subordinate.
- Valuation rules. How home value is set at settlement, and whether you can dispute it.
- Early settlement terms. Whether the payoff formula changes before the term ends.
- Partial settlement. Whether you can pay down some of the claim.
The CFPB's issue spotlight on home equity contracts reviewed 38 complaints. Consumers cited trouble refinancing their first mortgage, surprise at repayment size, and valuation disputes. That is a small sample, but it lines up with what these files tend to run into.
The Steps, in Order
1. Pull title and read the HEI documents. Learn whether it is a recorded lien.
2. Ask the provider for a payoff quote and a subordination answer. Get both in writing.
3. Pick the path. Leave it in place, or pay it off.
4. Appraisal. Conventional refinances normally need one. The new value sets the ceiling for the payoff and CLTV.
5. Underwriting. The lender reviews income, credit, ratios and reserves under the chosen program. It also treats a payoff due at closing as a real liability.
6. Closing. The title company records the new first lien plus the release, payoff or resubordination.
Expect extra title work and possible provider fees. These vary by contract, and the Loan Estimate and Closing Disclosure show what applies to your file.
What Lenders Look At
Beyond the HEI itself, the file is a normal refinance. The wholesale conventional programs generally start at a 620 decision score, and the automated findings govern most files, with a total debt ratio ceiling of 50%. Jumbo lanes run higher on score. Mortgage insurance applies above 80% LTV. You can ask to cancel it at 80% of original value with good payment history, and the servicer must end it automatically at 78%. All of this is subject to lender guidelines and not a commitment to lend.
The HEI changes the math in two ways. It adds to CLTV. And if it comes due at closing, it becomes a cash need your new loan has to cover.
Common Mistakes
- Assuming "investment" means "not a lien." The label doesn't control. Recording does. The CFPB has argued in a court brief that at least one HEI is a loan. That is a litigation position, not a rule.
- Assuming no monthly payment means no effect on a refinance. It still shows up in CLTV and at closing.
- Assuming the provider has to go along. Subordination or payoff terms are set by the HEI contract, so the provider's cooperation is not automatic.
- Expecting a rate-and-term to quietly pay it off. Likely cash-out instead.
- Relying on title insurance to cover a missed subordination. It doesn't.
- Lumping HEIs in with agency shared-appreciation programs. Programs like Fannie Mae's Community Seconds follow separate rules. They are not private HEIs.
When Refinancing Is the Wrong Move
Sometimes the stronger play is to leave things alone. If you would give up a favorable first mortgage just to retire the HEI, run the break-even first. Selling, or settling the HEI with other cash, may cost less. This one really is a toss-up depending on how much equity is at stake and how long you plan to stay.
If you get denied, find out why. A provider refusal calls for a different loan path. A leverage problem might be fixed by waiting or paying down the claim. A credit issue follows the agency waiting periods, such as four years from a chapter 7 discharge or seven from a foreclosure. Shorter periods apply with documented extenuating circumstances.
State rules on HEIs are also changing and vary, so ask your title company how your state treats yours.
Frequently Asked Questions
Will an HEI stop me from refinancing?
Not automatically. It becomes a problem if it is recorded and the provider won't subordinate or accept a payoff. Then the lender can't place the new loan in first position, and the refinance stalls until that is resolved.
Do I need the investor's permission?
If the HEI stays in place on a conventional, VA or FHA refinance, yes. The provider has to agree in writing to rank behind the new loan. If you pay it off at closing, you need a payoff statement instead, and your contract decides whether a refinance is allowed.
Can I refinance and keep the HEI?
Yes, when the provider signs a resubordination and the combined LTV fits the program. For a limited cash-out refinance, existing liens left in place must be clearly subordinate to the new loan.
Will paying off the HEI make my loan cash-out?
Likely. Fannie Mae's rules treat paying off a non-purchase-money second lien as cash-out, and an HEI generally isn't purchase-money. The guide doesn't mention HEIs by name, so confirm with your lender.
Can I refinance only part of it?
That depends on your contract's partial settlement terms. Lenders still need the remaining claim to be subordinated and counted in CLTV.
If you are weighing a refinance and want the break-even run on your own numbers, Lendmire can help you compare the programs on the same home. Start with Lendmire's refinance programs. For a related view, read Lendmire's piece How a Lender Counts a Home Equity Investment in a Later Refinance.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide, Subordinate Financing
2. Fannie Mae Eligibility Matrix
3. VA Lenders Handbook, Chapter 6
5. CFPB Issue Spotlight: Home Equity Contracts
This article is part of Lendmire’s Refinance series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How to Get a Cash-Out Refinance After Buying a Home With Cash · How a Lender Weighs Equity and Credit on a Primary Home Refinance · Cash-Out Refinance vs Home Equity Loan When You Need Full Value
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.