Secured vs Unsecured Seller Financed Note in Addition to FHA Loan

[Lior Rozhansky]

Hi BP, 

I'm currently structuring a deal which I need to present to my seller tomorrow. Essentially, my seller is willing to do some owner financing in addition to the FHA loan. I will obviously disclose everything to the lender and make sure that my DTI still stands acceptable (and I have seen the HUD requirements to get a carry-back approved, and met them all).

My question is is there a difference on whether the seller financed note is secured or unsecured with regards to a possible refinance? What I mean is if I get the seller to take an unsecured note (with a better interest rate to compensate him on additional risk), will that debt be counted as part of the "loan" in an LTV assessment if I try to get the property refinanced in a year (essentially will that note amount become instant equity for me which I can play with?). Or will the unsecured note be treated the same as a secured note at second position lien and be counted as part of LTV when I go and try to refi the place?

And if the latter is the case, is there anything I can do to create a note that is not assessed as part of the debt for the property, but is rather stand-alone debt?

Thanks everyone!