My friend wants to buy a house; however he does not have the capital to put twenty percent down because he loaned out his capital as a secured business loan last? year. He thinks all other business loans backing that startup are unsecured and he has the only secured loan but I don't think he actually knows this.
He currently thinks I can loan him the money secured by the first loan so he can put down the twenty percent without impacting the mortgage and so avoid mortgage insurance?
Does this scheme of securing a loan on the proceeds of a secured loan make sense at all or did he make something up?
I am not willing to provide a second loan on the house and assume almost all the default risk.
State is California and I have a hunch it matters.
FOLLOWUP: In case anybody is wondering how this went, I told him about how he'd have to lie to get the primary mortgage and that was the end of it.