Refinance existing private mortgage

[Jeremiah O]

Hi,
We purchased a house 4 years ago and financed it with a private mortgage. The private mortgage is with a family member and was for 100% of the purchase price. We were looking at refinancing the loan with a bank, but since the market tanked, we owe more than the home is worth. I wanted to get a 80% mortgage with a bank and keep the remainder of the principal as a loan with the private mortgage holder. I spoke with a bank who said that the original mortgage needs to be paid off in full, therefore this is not possible. Do we have any options other than pay off the remainder of the private mortgage with cash? Thanks in advance.