Posted by Michael Steele on March 14, 2006 at 10:44:22:
Ed
That is exactly what I am saying. The lender they may deal with would possibly say that it would be better to do it this way. I possed this more as a warning rather than a suggestion. I completely understand that a subordination of a seller’s 2nd is completely doable. That is assuming that the 2nd is written in a way to allow such a manuver.
Mike Steele
Refinance - Posted by bmeesh
Posted by bmeesh on March 14, 2006 at 04:29:43:
If you have a 1st mortgage, and a seller take back 2nd mortgage. Can you refinance just the first if you get hard money or do you have to refinance the entire thing? What kind of credit scores are needed for a refi. Also…if one person has credit in the high 600’s and the other is in the low 600’s do they pull the middle score for each and how does that let you qualify for a mortgage…
Re: Refinance - Posted by John Corey
Posted by John Corey on March 14, 2006 at 09:14:04:
Bmeesh,
Looking at the bigger picture will answer the first part of your question.
Liens have a priority based on when they are recorded against the property in most cases. Property taxes for a future year are superior but lets skip that for a minute.
So, if there is a 1st and a second that means that the lien securing the first note was recorded earlier or prior to the 2nd.
Lets assume you pay off the first note. The lien securing the lien will be retired. Then the second lien slides into first. As a new loan would be newer than the already recorded 2nd you can not take out a loan to pay off the first if you expect that new loan to be recorded in first position.
One exception to this model is when the 2nd has a subordination clause. The clause says the lender agrees that their position can be subordinated or made junior to a new lien (loan). Most seconds would not have such a clause as lenders on seconds do not want to be subordinated. The few that will agree are doing so because they were somehow motivated (better rate, terms or something else to compensate the lender).
It might make sense to get a new 1st and second or just a new first that pays off the existing 1st and 2nd. Or it might make sense to get a new 2nd to pay off the second.
John Corey
Re: Refinance - Posted by Michael Steele
Posted by Michael Steele on March 14, 2006 at 09:13:29:
Bmeesh
Most lenders will push you to refinance the entire deal rather than having a seller’s 2nd resubordinated (meaning having the 2nd continue to stay in 2nd place) although it is not impossible – would be looked upon by a lender as something to get rid of and put into the loan to be paid off.
Score wise it looks as if you are fine (considering all other stipulations line up correctly) But your thinking is correct as they would pull a middle credit score to get the deal done. Again – if your high and low are both in the 6’s then you should be fine.
Please contact for further info
Mike Steele
Re: Refinance - Posted by Ed Garcia
Posted by Ed Garcia on March 14, 2006 at 09:48:42:
John,
Good answer. The only thing I could ad is even if the second did not already agree to subordination, they may if the new loan is a rate reduction improving their position.
However this could also give the borrower an opportunity to ask the seller to discount their note for an early payoff.
Ed Garcia
Re: Refinance - Posted by Ed Garcia
Posted by Ed Garcia on March 14, 2006 at 09:58:26:
Mike,
Come on Mike, if a lender would do a deal with a seller carry-back, they would still do a deal with a subordination. You know and I know what you?re saying is what most Mortgage Brokers would tell a customer to build the loan and is easier from a Mortgage Brokers stand point.
Meanwhile, thanks for your in put on this board, we do appriciate you,
Ed Garcia