Short answer
A supplemental adds proceeds without disturbing the in-place senior loan . Full refinance pays off the senior and resizes the entire stack. Supplemental wins when the in-place senior carries a below-market rate; full refinance wins when the senior is at or above market and yield maintenance is light.
When does full refinance still win?
When yield maintenance on the senior is modest (late in the loan's term or originated at low base rates), when the sponsor needs to materially increase proceeds beyond what supplemental would allow, or when the existing senior carries an undesirable structure (recourse, restrictive covenants) the sponsor wants to escape.
Sources
- Delegated Underwriting and Servicing (DUS) program disclosures · Fannie Mae · current