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Second Mortgages

Charging a second mortgage on a property?

Charging a second mortgage over a property that already has a mortgage on it may sound daunting to some, but there are scenarios where this funding approach is strategically favorable.

What is a Second Mortgage?

 

A second mortgage is a mortgage over property that has a lower rank or position than a first mortgage. A second mortgage loan uses the equity available in your existing property to free up cash. It is generally of lower value than your existing first mortgage and is used for a short period of time.

Second mortgage finance will generally have a higher rate than your existing loan. There is a greater risk in lending against a second mortgage. The second mortgage lender takes a lower priority than the first mortgage lender who is paid first from any proceeds from the sale of the property. The rate reflects this risk to the lender.

For example, assume you have a mortgage for $300,000 secured on your home with Lender A and you apply for a second mortgage of $100,000 on the same home with Lender B. If you couldn’t pay back the loans and the property was then sold for $360,000, Lender A would be repaid in full and Lender B would only receive the remaining amount, leaving them out of pocket.

Typically, a second mortgage loan can utilize a higher loan to valuation (LVR) ratio against the security property. This allows you to unlock a greater portion of your property and provides cash for your finance needs.

About Financing

How can you use a second mortgage loan?

 

Second mortgage finance can be used in a variety of ways for business use:

 

  • For business use: the purchase of inventory and stock at opportunistic prices
  • Business debt consolidation: consolidating existing business debt to free cash
  • Property development: Sub-division of property, DA costs, Incomplete projects etc.
  • Seasonal business cash-flow needs
  • Accessing additional capital: allows you to expand your funding options and provides options for your business’s financial needs and objectives
  • Boosting your deposit for a new property purchase

 

If your first mortgage is on a fixed rate loan with high exit fees or you just want to keep your great low rate, you may choose to borrow with a second mortgage rather than refinance for your next project. 

We have lenders who can work with you to fund a second mortgage loan within 48 hours.
Contact us to find out how we can help.

Don’t be afraid to chase your dreams; let us find the solution to fund your project so you can make your mark!

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At IBN, we work closely with our panel of Funders, to move quickly on your loan application. We understand that ‘time is money’ and we make the loan process as seamless as possible. Our experienced staff assist you every step of the way with frequent communication on the loan progress.

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