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 Private Mortgage

Private Mortgage Creative Real Estate Financing Technique #8

A private mortgage can be moved from a senior to a junior position. Take a look at the following situation: A seller has a property on the market for $60,000.

There is an existing private first mortgage on the property in the amount of $30,000.

Approach the private mortgage lender to see if the mortgage can be moved from a first position (senior) to a second position (junior) if you pay $10,000 in cash. Agree to pay the cash after a new first mortgage is secured. This will reduce the mortgage from $30,000 to $20,000. Next, put a new $40,000 first mortgage on the property; $10,000 of this will be the cash that goes to the private mortgage holder and the other $30,000 ($40,000 less $10,000) will go to the seller. this no money down technique works well when the private mortgage holder is not willing to discount the mortgage in return for a complete payoff.

If you own property that has a private first mortgage, you could use this same technique to remove your equity for other investment purposes. However, many people like the security of having equity in their homes.

Example Summary Technique #8

Move A Private Mortgage From A Senior To A Junior Position


What You Need To Begin:

Good Credit


Summary Of Terms:

Asking Price


First mortgage




Agree to pay the mortgage lender to move mortgage to a junior (second) position. 


A new second mortgage results from this transaction.


Obtain a new first mortgage.


Pay second mortgage holder.


Pay the balance to the seller.





  • The seller receives $60,000 for the property and receives all cash for equity in the property.
  • The buyer has a no money down deal, a $40,000 new first mortgage and a $20,000 second mortgage.
  • The original private first mortgage lender now has a second mortgage but has received $10,000 in cash.

Specific Situations to Apply Technique #8


The Property

Existing 1st or 2nd Mortgage Private


The Buyer


The Seller

Private Mortgage To Bank Loan