How Do I Create A 2nd Mortgage???
I'm thinking of holding a second mortgage on a property. How exactly is this done? What are the pitfalls?
Will a bank finance 80% on a house that has the owner carrying a 20% 2nd mortgage?
Example: $100K property, 80K first, 20K second.
Two ways to do it - as part of a sale or otherwise. In Calif we use escrows and trust deeds instead of lawyer closings and mortgages. Part of sale: Seller and buyer agree on deal - buyer deposits into escrow a note in the agreed amount, and signs a trust deed. The trustee, an independent company, can supply the form. Outside of sale - you loan x some money, he gives you a note and signs a trust deed, you get the trust deed recorded and also record a request for notice of default on liens senior to yours. If your state publishes a RE ref book, you might want to get it. Regarding lenders - if you give a 10% second and buyer deposits 10% - they typically will treat it as better than a 10% down but not as good as a 20% down, since in a 20% down the buyer is more motivated.
Some lenders will not do seller financed second mortgages, so ask the lender first. It would be nice for the buyer to have a stake in the house on case they default.