Maybe you have already taken out a first mortgage loan by putting your property as security. Now, you want to mortgage the same property for a second time to get a quick loan for business. Since the second mortgage loans do not take much time to get approved, you can quickly have one approved for your business needs.
Second mortgage lenders will lend as much as 75% of the value of a property, the lenders will assess how much is already owing on the property and offer an amount that does not exceed 75%. According to the mortgage policies, the second mortgage lenders will get repaid once the first mortgage lenders get fully paid in the event of a sale of a property.
The amount available depends on several factors
Second mortgages for business use are very easy to obtain. Since business loan lenders will sit behind the current first mortgage on a property the interest rate generally will be higher.
Second mortgage loans for business use are generally only for a short term.
Generally, the borrowers need to have sufficient equity in the property being offered as security, the amount available will be determined by the equity in the property. However in some circumstances the lender may provide higher than 75% for example if the property is under an unconditional sale contract the lender may exceed this limit as there is a guaranteed exit strategy for the loan.
1. The reason behind getting a second mortgage
Even though the purpose for a second mortgage does not affect much a borrower can apply for, the information helps the lenders assess the borrower’s current financial situation. Since the borrower has an ongoing first mortgage loan, a second mortgage is a great option if you are in need of urgent funding for your business. Also, the borrower might need a second mortgage for purchasing a commercial property. So, all the information is vital for the lenders to determine your ability to repay the loan repayment.
2. First mortgage loan repayment
Are you repaying your first mortgage loan on time? The answer to this question calculates the risk factor of your loan. Generally, second mortgage lenders examine the first mortgage loan payment status. If there are any arrears on the first mortgage the lenders will insist that these arrears are paid from the second mortgage loan proceeds.
3. The credit score of the borrower
A poor credit score can severely affect approval with traditional second mortgage funding from a bank, however with private funding your credit score is irrelevant, and you can even have defaults and still be approved for your second mortgage. If you did not repay your previous loans on time, it could result in a bad credit score. So, all these factors can affect the amount that gets approved for the second mortgage. That is why financial advisors always suggest improving credit scores before applying for a second mortgage loan through traditional funders.
4. The financial condition of the borrower
The current financial status of the borrower can influence traditional lenders of the second mortgage loans. Traditional lenders will require 2 years of full financial records before assessing the application for second mortgage funding. However again with Private funding full financial records are not required as the loan amount is based on the available equity in the security property and also the exit strategy on how the loan is going to be repaid.
Final thoughts
We hope our article has made it clear second mortgage funding from a private lender and not a traditional bank is a quick and easy option that will see funds available for any worthwhile business purpose. If there is equity in your property then you will be almost certain to be helped.
