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I am sorry to hear about this situation.
Can I borrow $100k from a private party and put up my property as collateral?
YES. The private party would then be a "junior lender." See HERE. This is not unusual.
In the unlikely event that I dont pay back this promissory note, how can I assure this particular private lender that he will receive his money through my property?
This should happen by default if the numbers you mention are true. If you default, the junior lender will then have the right to trigger a foreclosure. The primary lender will get the money at sale to cover their outstanding contract, and the rest will go to the junior lender.
$250 property foreclosed upon
$35 goes to primary lender
$100 goes to junior lender
Rest ($115) goes to you.
Does he put a lien on the property?
Yes. Or rather, he includes himself as a junior lender.
How will the process work and the cost involved?
If you use an attorney, this will likely cost about $2,000 or so in legal fees to draft everything. Without counsel, there is no legal fees per se, and the recording fee is minimal ($50, etc), but it may be very complicated to get all of this on paper without an attorney.
I suppose only mortgage or deed of trust can be recorded with the property and not a promissory note?
He would become a junior lender - his mortgage note can also be recorded.
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