Posted by Tim (Atlanta) on January 28, 1999 at 13:02:57:
What Carleton is counting on is that :
You bought the house at a price that is much less than the appraised value OR
The house will appreciate and you will pay off some of the debt in the 5 year time span.
This means that at the end of 5 years, you will have paid down the first mortgage as well as the second mortgage by an amount sufficient to refinance the entire outstanding balance of both loans. This can and certainly does work, but you must be careful how you structure the deal. Don’t amortize the second over 30 years, you will accumulate no equity.