Commercial Second Mortgage

Commercial second mortgages have always been a very rare financing tool reserved for very strong borrowers, divided into two general segments.

1. owners homeowners with outstanding business finances. 2. Grand sophisticated commercial real estate developments with minimum loan amounts from $ 5 million. Typical project size would be 15 million dollars and more.

Both types of loans have been out of reach for the vast majority of commercial real estate investors and users. The owners did not reliably or effectively to access their equity without refinancing their existing loan or taking the top position on the "equity partner dreaded.

Some national lenders have recently begun to offer commercial loans to fixed rate second to the surprise of industries. This loan structure may change radically if the illiquidity of many owners complain.

The terms of the loan program, the fixed periods ranging from 5 to 10 years with amortization schedules of 25 to 30 years.

The loan amounts are small, ranging from $ 50,000 - $ 500,000 with a max combined loan to value of 70 to 75%, among other details. Rates are high for the borrower with excellent credit, but up sharply for borrowers with good credit rating decent. To date, the lowest rate would be 7.31% for a borrower with 720 + credit and a loan amount between $ 400,000 - $ 500,000.

It is interesting to see what our customers use the second commercial mortgages. Among the most creative scenarios include:

Commercial use of loan products in the 2nd installment on a new acquisition.

For example, the borrower may draw from the equity on existing property and use that capital as the advance payment of costs of the closure of a property purchase of new business. Essentially maximizing the overall leverage of the portfolio owner and limiting cash pocket.

The subscription of the second loan would go beyond the existing property and would not negatively affect cash flow and debt coverage ratio or the property purchased.

Use of commercial mortgage 2nd as capital rehabilitation.

Unfortunately commercial rehabilitation loans are also awesome and heavy as a ground up financing, requiring an extensive underwriting and reporting. Tapping the equity in another property through a commercial rate established second mortgage, the borrower can avoid the "process" of a traditional commercial rehabilitation loan for the construction /. The borrower in this example would simply receive a lump sum of capital and can spend this money as it sees fit. There is no lag or city to allow review and approval.

At the end of the project the borrower could refinance the loan of property under renovation and use the proceeds to pay the second highest commercial mortgage loan program related to building rehabbed.

Use the second commercial loans for working capital for the Day of daily activities.

Many borrowers do not like the idea of a variable rate line of credit. Many business owners prefer to have the guarantee of a fixed rate loan that allows them to better anticipate / manage their cost of capital. Business owners have virtually no restrictions on the use of loan proceeds. Common uses include equipment purchases, the launch of advertising campaigns, to invest in new technologies, etc.

Whatever the use or intent of the borrower, the new commercial mortgage second provides a solid option and a tool for additional funding for commercial property owners.