Private Lenders

Say you have a subject to. How can you give a first mortgage to a private lender if you are going to be making the mortgage payments?

First things first! That is kind of a trick question because you can borrow both first and seconds from private lenders. Did you know this?

Now private lenders come in handy when you're borrowing a second behind the subject-to loan. In fact, it will always be a second if it's behind a subject-to loan, and that is commonly used when you are borrowing small amounts of money to either bring payments current (or pay the seller some cash to get out - or both - or doing some repairs, etc.).

It will always be second and it will always be behind the first. So, you will find those loans easy to get because they are small amounts. You may also realize you can get a lot of investors that don't have the larger amounts that it takes to make the first mortgage.

As long as you keep your loan to value ratio down below about 70% or so on that second you shouldn't have any trouble at all getting those seconds.

So how can you give a lender a first mortgage?

Well the only way you can give a lender a first mortgage is pay off all the underlying debts on the property with that private loan, which means it is going to be a larger loan than any small second. The order of which a mortgage is, whether it’s first or second, is only when it is recorded.

So, in essence, you have to get enough from the private lender and give him the first mortgage.

And that frankly is foolish to do on most subject-to deals with low interest loans on them.

You never borrow high interest money to go pay off low interest money!

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