Mortgage Loans Guide

A commercial second mortgage is an important commercial real estate tool. Commercial second mortgages are often used in conjunction with a new first commercial mortgage loan. Typically, the commercial second mortgage will have a term of one to five years with interest only payments. While commercial second mortgages can be critical in some financing scenarios, consideration must be given as to whether or not you have the ability to service both loans.

There are some clear advantages to this type of creative financing. The most frequent use is that a commercial second mortgage reduces the LTV (loan to value) of the first mortgage in order to allow you to more easily qualify for the first mortgage. An example would be where the primary lender (first mortgage holder) will only lend 70% LTV and you only have a 20% (or less) down payment. A commercial second mortgage can be used to make up the difference. Other uses for a commercial second mortgage are to finance business expansion and construction, working capital, to consolidate debts, pay tax arrears (lets face it, this does happen), or for renovations.

There are a variety of options available to you such as: interest only payments, annual payments, exit fees, etc. that will help keep your immediate payments down and defer the costs of the commercial second mortgage. The idea is to give the property time to appreciate and thereby allow you to refinance and consolidate both the first and second mortgages at a later date at a then lower LTV.

One main reason for getting a commercial equity mortgage loan is to obtain a line of credit. A line of credit is an amount of money made available for you to borrow from whenever you wish. When you get a line of credit with a commercial equity mortgage loan, what you’re actually doing is getting a new ‘mortgage-loan’ on your commercial real estate for a particular amount. For example, instead of taking that amount, say $500,000 out of your commercial real estate in cash, you leave that cash in, but make it available as a line of credit. Of course, this line of credit is accessible whenever you need it, paying interest only on the amount you use, and only when you are using the line of credit. If you took the $500,000 out in cash, you would have to pay interest on that full $500,000 until you completely paid it back. So a line of credit is a money-saving option as opposed to getting full ‘cash out’ with a commercial equity mortgage loan, especially if you don’t need to use the entire amount of equity in your commercial real estate all at once. If you get a line of credit by getting a commercial equity loan, it can act as a safety blanket for you in case of financial emergencies. Also, you can get a line of credit with a commercial secured equity loan far cheaper than you can get a regular line of credit from a bank.



By: Donna Elizabeth Lewczuk

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At some point in your life you will need to acquire a home for your family and the best way is to pay for the acquisition. That will be one of your most important financial decisions that you will embark on and that mean that you have arrived. Before congratulating yourself you have to take a hard look at the home mortgage loans out there so that you will get the best deal.

If you will to do a thorough research there are literally thousands of lenders and you will be befuddled by the choices but to ensure that you get the right home mortgage loan, look at the information around you that could mean the difference between great discounts and a costly loan.

In opting for a mortgage loan, you can do all the homework on your own or get the assistance of a mortgage broker to aid you. To do it on your own, it is necessary to be very familiar with the financial features of an equity loan, if not a mortgage broker can take the load of you.

To get the right home mortgage loan is not as difficult as it seems but for beginner, it’s always the need to go through a learning curve. While trying to figure out, you may make all the wrong decisions but the main thing is to get it all right come the final contract as you are the one who is going to be responsible for all the finances.

Follow certain relevant tips and you will be better off before embarking to choose the right home mortgage loan. Firstly save all that is needed to deposit in a bank before considering looking at the property. Some mortgage loans typically known as the 100% mortgages offer the full amount of the loan for the property but such instances are exceptional so keep looking until you get the best deal.

The second tip is to get ready your insurance for your home mortgage loan as it is one of the most important points in getting a home. Most tend to leave this to the last minute and might forget about it totally. To get a mortgage loan, all banks will request that the property is insured so don’t get yourself unprepared.

If you appoint a mortgage broker, work personally with them as some might abuse their position, hence your need to be aware of such a situation in case they occur. Do all you can to protect yourself as well as apply some commonsense.

To educate yourself, take a look as many reviews of mortgage lenders as possible so that you can contrast. Getting the right mortgage loan is within your ability if you are educated and not afraid of putting in the effort required.



By: Ernest Tang

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Commercial real estate investors that are involved in renovation projects and or actively seeking new acquisitions should take a hard look at the new commercial second mortgages that have become available. This commercial equity loan can create a significant amount of liquidity in investor’s existing commercial equity. Equity th at was previously dormant can now be “tapped” and used in other projects.

The most common uses that we see investors employ with this loan is as property rehabilitation capital or as down stroke capital for new building acquisitions. Investors that have been involved in traditional commercial construction loans understand the extensive process/reporting requirements and like the idea of avoiding this, by pulling cash out of another property via a commercial second mortgage and use those proceed as the rehab capital on a another property.

Likewise, many investors do not want to tie up cash into an acquisition. Investors can pull cash out of an existing property and use that capital as the down payment on the new purchase, effectively buying the property with 100% leverage.

The concept of a loan that sits in second lien position is certainly not new, but is rare. The vast majority of banks would never sit in second position especially if they do not hold the first mortgage. Said in another way, the significant point of the new commercial second mortgage is that it sits in second lien position behind any existing first mortgage, regardless of the underlying bank/lender.

The other major benefit of the Commercial Second Mortgage, (which will be hard to believe) is that the funding bank incurs the third party costs directly. The borrower does NOT have to pay for an appraisal, title, environmental or any other types of upfront fees. The borrower literally has no cash into loan with the only fee being an origination fee of 1% to 1.5% depending on the loan amount.

Investors need to examine their equity positions to determine if this is an option. The program is limited to a combined loan to value of 75%.

For example, if your existing first mortgage is at 50% loan to value you would be eligible for a 25% loan to value second mortgage. Also, there is a combined debt coverage ratio limitation of 1:1.25. Other requirements include needing to own the existing property for at least one year and the borrower needs a minimum credit score of 680 to qualify (among other less important requirements).

As far as the negatives, by far the most common complaint is the loan is capped at only $500,000 and the property value cannot exceed $3,000,000. Not surprisingly, the interest rate is higher than a typical bank loan and is heavily influenced by the borrower’s credit score.

Another negative is that expenses on the property are taken off the owners schedule E or 8825’s of their tax returns which, for obvious reasons, are typically reported higher than what they really are.

Despite these restrictions the overall program can be an outstanding tool for commercial real estate investors to unlock equity and use these proceeds to grow their overall commercial real estate portfolios.



By: jeff rauth

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Are you in need of an equity mortgage loan? Well, if you’re a homeowner and you need a large amount of cash, then a second mortgage equity loan may be your answer. An equity mortgage loan can be used for whatever needs you have. Be it a remodeling project or paying off high interest credit card debt, etc.

These second mortgage loans are not that difficult to qualify for due to the fact that the lender will have your home put up as collateral to secure the loan.

The biggest issue will be the interest rate. If you have good credit you can expect to pay very low interest, generally around prime + 1% or so. But, if you currently have some credit issues going on, you can expect to pay much higher interest rates.

The key is to look at what the money is going to be used for. If you plan on paying off credit card debt, what is the interest rates on the credit cards compared to the rate on your mortgage equity loan? Depending on your credit, it could be a wash.

Many lenders offer great rates on these loans. The important thing is to shop around. Check out several different lenders before making a decision.

You’ll find home equity loans with repayment terms of 5-10-15 or even 20 years.

By having a clear understanding of what you need the cash for, and looking around at various lenders, you will find the right second mortgage equity loan that is right for your situation.

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By: Terry Edwards

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