Private 2nd Mortgage Uses
“When Does I Make Sense To Utilize A Private 2nd Mortgage?”
A private 2nd mortgage can be utilized in a number of different financing scenarios.
The most common application of a private 2nd is when a borrower has equity remaining in their property, wants to leverage it through additional mortgage financing, but can’t qualify for additional funding from a bank or institutional lender, and does not want to lose the good rate they have on the current first by refinancing with a sub prime lender.
This is a very common occurrence in situations where someone’s credit card debt has built up and their credit has been strained or damaged as a direct result.
The private second mortgage can quickly provide the funded necessary to pay off or pay down the credit cards, instantly improving your credit profile and potentially your cash flow at the same time.
While this is the most common use of a private 2nd mortgage, there are many others as well.
For instance, in the construction market, its very common that construction loans are provided to the builder or property owner as a private second behind the existing mortgage that was put in place to originally acquire the property.
At the end of the construction period, it the existing owners are going to occupy the property long term, a take out mortgage is arranged against the property to pay out both the first and second mortgages that are in place.
Still other applications for a private 2nd mortgage are when a short term source of capital is required for an activity related or unrelated to the property the mortgage will be registered to.
Because private second mortgages are equity loans, as long as the property has enough equity to cover off the risk of the lender, private funds can be acquired for a number of different short term or bridge financing requirements.
Depending on the property and the borrower profile, private mortgage lenders will typically go as high as 85% loan to value on a private mortgage second with rates that will be two to three percentage points higher than a private first mortgage on the same property.
If you are in need of a private 2nd mortgage, you need to be working with an experienced private mortgage broker who can quickly assess your situation and provide you with private second options for your immediate consideration.