Paying off Private and/or Conventional Loan in Refinance OH

[Mikael Winkler]

Hello all,

I have a general question about paying back renovation financing through a refinance of the mortgage. I recently bought a duplex that I plan to renovate and rent. Essentially, my plan is to secure either a personal loan through a bank or investment from a private investor. The lender who originated the mortgage for me only deals with mortgage and refinance, otherwise he'd be able to lend the renovation funds I need. 

I am unable to do a HELOC, as I haven't built enough equity to pull out. However, I want to renovate because the units aren't rent ready as they are now. My question is, if I secure a personal loan, how does that get paid back in a refinance, since the funds aren't tied to the property like they'd be in a HELOC or equity loan? My lender seems to think it will be more difficult, though it can be done.

Can the bank and/or investor that lends the renovation funds put a 2nd position lien on the property? I know putting a lien on a property is usually a negative, but I'm thinking off it more from the perspective of making it easier to pay off in the refinance. Any thoughts or advice is greatly appreciated!

Mikael