How do you refinance a subject 2?

[Reynaldo C.]

Hello all,

I have a question regarding a subject to.

If one were to acquire the title of a house on a sub2 and the property had substantial equity, of course it would make sense to flip; however, i am looking to hold this property. the question is: How do u take care of the mortgage that is in the sellers name? what i mean by this is, if u are already making the the payments on the sellers mortgage and you are the title owner, but you want to remove them from the mortgage (so their credit won't be affected), do u take out a New mortgage on the property under your name and pay the first mortgage with it??

Note. property is in Los Angeles

[Aaron Mazzrillo]

If you refinance the property, escrow will send a request for demand to the current lender. That lender responds with the payoff amount which will be good through a certain date. Your new loan funds, the old loan gets paid off and reconveyed, a new deed of trust is recorded against the property in first position.  Now you have signed up for a long term liability and since it is a refinance, not a purchase money loan, you could be held personally liable for any default. Which means, yes, they can sue you in court after the foreclosure and come after you forcing you into bankruptcy.

So, a question I have is, why would you EVER want to pay off a sub2 loan with a loan in your own name? If it is a balloon or adjustable I understand, but if it is a fully amortized loan with a low interest rate, there is very little risk. Don't let the imagined fear in your mind cause you to make an irrational decision.