I want to buy a new home. Will the SBA allow me to substitute the lien on my old residence for a new one?
Yes, it is possible, but the SBA does not have to do so. SBA guidelines do allow a Guarantor to substitute a lien on a new residence in exchange for releasing the lien on the Guarantor’s existing residence. However, at a minimum, the following conditions must be satisfied:
A. All of the proceeds from the sale of the Guarantor’s existing residence, other than the funds needed to pay off senior liens and necessary, reasonable and customary closing costs, must be used to purchase the new residence, placed in an escrow account to facilitate the purchase of a new residence, or used to pay down the SBA Loan;
B. The amount of equity in the new residence available to secure the SBA loan must be the same as or greater than the amount of equity in the existing residence available to secure the SBA loan;
C. The release of the existing lien, or proceeds thereof, must be concurrent with the recording of the new lien in the required position of priority and should be done pursuant to an escrow agreement signed by all of the parties involved in the transaction; and
D. Guarantor must provide the title, hazard and flood insurance.
If you would like more information on this subject, you may contact the Perliski Law Group at (214) 446-3934 for a free initial consultation.