“The big mistake homeowners make is turning a “non-recourse” second loan into a “recourse” loan by refinancing it. A non-recourse loan is a loan that the bank can only look to their secured interest.
So how is a second mortgage a non-recourse loan? Simple, it was “purchase money” for your home. A purchase money loan is one where the money went from the lender, to escrow, and then to the seller or to pay purchase closing costs. In California purchase money loans made on your home (note: not second home or investment properties) are non-recourse. It’s simple as that.”