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 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 | $60,000 |
| First mortgage | $30,000 |
| Procedures: | |
| Agree to pay the mortgage lender to move mortgage to a junior (second) position. | $10,000 |
| A new second mortgage results from this transaction. | $20,000 |
| Obtain a new first mortgage. | $40,000 |
| Pay second mortgage holder. | $10,000 |
| Pay the balance to the seller. | $30,000 |
| Results: | |
| 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 |
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