Will a secured promissory note on a person’s home prevent them from being able to refinance their mortgage

Considering doing Secured Promissory
Note against their home for person to
sign and noterize in order to receive
reimbursement on payment of debt in the
amount of 100k.

Asked on June 7, 2017 under Real Estate Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

It does not legally prevent it, in the sense that a lender *could* choose to refinance; but it is unlikely that any lender will refinance unless the $100k is such a small portion of the total equity available in the home that a lender could refinance confident that there will be enough equity to protect them in the event of a default. Otherwise, if the note and the obligation on it represents any appreciable portion of the available equity, lenders would be justifiably reluctant to refinance, since in the event of default, the already existing note would be paid before their later-granted mortgage, meaning that they may not be paid, or at least not in full.

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