You want to pay off the loan on your property early so you can use it as collateral to take out a loan on your property?

If you win, there is not really an issue.I have taken a note for past due mortgage payments with perfected liens on vehicles, it's another collection situation but your collateral needs to be sufficient to cover costs as well.Simply have someone sign over an asset has several pitfalls, from valuation, to taxes, to wrongful collection practices.

Once a lender, always a lender.There are two legal theories at play, one is title theory the other is laws of equity.State laws vary, but the Uniform Commercial Code addresses collateral matters with installment sales.Cash funded loans are secured to indemnify the lender or note buyer up to the financial interest acquired under the security agreement, the lender holds an equitable financial interest they do not acquire title in ownership.After foreclosure title may be obtained however laws of equity still apply and apply in all states.

From the sounds of it the lender made a loan to a person who didn't have the right (at that time) to sign loan documents for the collateral she used.

Many new investors use portfolio loans to get started in this business -- underwriting guidelines are simpler and more geared towards the hard asset as collateral, with rates that are relatively close to conventional.Personally, about 30 of my first 50 deals were funded using portfolio loans.  

The home is also collateral for a line-of-credit balance of $62,000, and a current monthly finance charge of $130. 

@Ryan Moore if the loan is collateralized by the real estate asset, the private lender must issue you a 1098 Mortgage interest statement at year end.

They also have a great system which functions much like escrow, where collateral, ownership, proof of funds and other items are verified prior to consummating the transaction. 

I don’t mean to hijack the discussion but your mention of cross-collateralization made me curious.

You can borrow using the cash value as collateral at 5%.