What is a second mortgage?
A second mortgage is a lien on a property which is subordinate to a more senior mortgage or loan. Called lien holders positioning the second mortgage falls behind the first mortgage. This means second mortgages are riskier for lenders and thus generally come with a higher interest rate than first mortgages.
A second mortgage can be structured as a fixed amount to be paid off in a sufficient time. A second mortgage taps into equity in your home, which is the market value of your home related to any loan balance. A second mortgage can be increased or decreased but ideally, a second mortgage should only be used for a short period of time 1-12 months.
Second mortgages offer lower interest rates than unsecured loans, securing the loan with your home helps you because it reduces the risk of the lender unlike unsecured business loans, such as credit cards, car loans, and personal loans etc. Second mortgage interest rates are commonly 1-2% a month.
For example, if you had a mortgage with NAB for $1 million dollars secured on your home or investment property and you then applied for a $500,000 loan with Prime finance, this would be set up as a 2nd mortgage/caveat behind the NAB loan at a LVR of 75%.
In the event that you didn’t pay back your Prime finance loan and the property was sold for $2 million dollars, NAB would be repaid in full 1 million dollars plus any costs and Prime finance would receive $500,000.00 plus there costs, and you the client would receive what was left over.
How much can I borrow?
Most private lenders restrict your Loan to Value Ratio (LVR) to between 60-75% of the property value at Prime Finance we go to 80% LVR!
- Fast turnaround times, 3-7 days
- Loan amount up to 80% of LVR
- Serviceability accountant’s letter
- Easy lending criteria, minimal application and non-time consuming, an experienced broker will make the Prime Finance application process run smoothly
Short term 2nd mortgage loan
Short term 2nd mortgage loans are no longer than a 12 month period or as short as one month.
Intermediate 2nd mortgage loan
Intermediate term 2nd mortgage loans usually have a term to maturity of 1 – 3 years.
Prime Finance 2nd mortgage product guides business purpose
- Loans up to 1.5 million dollars
- LVR up to 80% of as is value (terms and conditions apply)
- 2nd mortgage loan rate is 1% per month
- Loan term is 1 month to 3 years
Prime Finance acceptable 2nd mortgage securities
- Residential properties in metropolitan areas
- Rural / Residential properties (population over 50,000)
- Commercial properties
- Industrial properties
- Vacant Land (in metropolitan areas only, LVR up to 75%)
Development sites (subject to terms and conditions)