Second Mortgage Brokers

What Is A Second Mortgage?

A second mortgage is a mortgage registered against the title of your property behind another mortgage. Consequently, the initial mortgage is called the first mortgage. As such, a second mortgage allows access to equity in a property without the requirement of a refinance or paying out the first mortgage.

Example: Let's say your home is worth $500 000, and you owe $100 000 on your first mortgage, you would have $400,000 equity in your home. Consequently, a portion of the $400,000 can be accessed using a second mortgage.

The first mortgage will have a priority interest to be paid out before the second mortgage. Consequently, if a lender forces the sale of a property, then the first mortgagee would be paid out first. Then, the remaining funds from the property sale would be used to pay any other mortgages or caveats.

Second mortgages finance can be an effective method of obtaining funds when traditional finance is not possible because of one of several reasons. As such, the lender policies are very different from traditional lending in that attention is paid to exit strategy over an ongoing payment. Therefore, second mortgage loans need to be effective and practicable for the businesses requirement and purpose.

Second mortgages loans equity requirement?

Short term business loans such as caveat loans and second mortgage loans assume a higher risk for the lender. Because, the income verification requirements are low or non-existant. As such, to reduce the lender risk of financial loss, they would require more available equity. In general terms, lenders require 25% equity or a maximum 75% LVR inclusive of any capitalised interest payments. In some cases, with a strong exit strategy, plus lender comfort your ability to meet payments, a loan can be provided without capitalising payments which provides you with more surplus.

When is a second mortgage useful?

Secured business loans have many uses perfectly suited to business requirements. Such as:

  1. Firstly, Business loans to pay gst or tax debts
  2. Then, money owed to creditors or suppliers.
  3. Thirdly, obtain working capital to keep trading.
  4. Credit defaults prevent funds from traditional lenders.
  5. No or insufficient income evidence available.
  6. Finally, to pay mortgage or rates arrears.

Second Mortgage Lending Criteria

Second mortgage loans purposes:

  1. Firstly, you don’t fit the lending criteria of traditional or other lenders.
  2. Secondly, you need the funds urgently, and mainstream banks cannot provide funds fast enough.

Some of the benefits of second mortgage business finance relate to the two points above which I will expand on:

  • Second Mortgage Finance is predominantly for business purpose only.
  • Usually no income assessment is required.
  • Pure Asset Lending
  • Suitable for start-up businesses – 1 day ABN registration.
  • Payment of Tax Debt and other business debts ok
  • Some don’t require valuations

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How Fast Can A Second Mortgage Be Settled

A second mortgage needs to be approved by the first mortgagee which can take some time. While the second mortgage lodgement is being negotiated with the first mortgagee, the second mortgage provider gives access to funds secured by a caveat against the property title. This allows for extremely fast loan settlements.

  • 24 - 48 hour settlement is achievable. This is pending that all requirements met.

Main Uses For Second Mortgage Finance

  • Pay creditors to stop a business wind up
  • Business Restructuring. They can be used when closing one income entity and establishing a new trading ABN and entity.
  • Liquidation of a company. Such as business restructuring where overdrafts and business loans need closure or put under a new entity. Consequently, the short term income won't fit the lending criteria of traditional lenders.
  • Part or full payment of ATO debt. As such, the first mortgage refinance is the preferred method of funding ATO debt. However, at times, second mortgages are required if a pending judgement or court proceeding is imminent and funding cannot be settled in a satisfactory time frame.
  • Part or full payment of business debts such as outstanding invoices, business overdrafts or business loans.

If you want advice about applying for a second mortgage, or other options to solve business debts, contact our team for a free consultation.

Let's talk about a solution that suits you

Risks and Benefits of second mortgage loans?

Second mortgage loans are predominantly business loans. As such, second mortgages have substantial benefits for a business requiring funds fast:

  1. Firstly, you don’t fit the lending criteria of traditional or other lenders.
  2. Secondly, you need the funds urgently, and another more mainstream lending cannot provide funds in a sufficient time frame.

Some of the benefits of second mortgage business finance relate to the two points above which I will expand on:

Second Mortgage Lending Criteria

The criteria for specialised business finance is different to traditional lenders. As such, the criteria  morexible and able to provide business an injection of cashnaditonal finance requirement are not suitably able to be met.

  • Firstly, second mortgage finance is predominantly for business purpose only.
  • Second, in most cases no income assessment is required.
  • Thirdly, suitable for start-up businesses – 1 day ABN registration.
  • Also, payment of tax debt and other business debts ok
  • Finally, no valuation required in some cases.

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Speedy Settlement

A second mortgage needs to be approved by the first mortgagee which can take some time. Consequently, a caveat is usually lodged while the second mortgage is being negotiated with the first mortgagee. As such, once the caveat is lodged against the property title funds can usually be provided. Therefore, it starts as a caveat loan and ends with a second mortgage.  As such,  allowing for extremely fast loan settlements.

  • 24-48 Hour settlement achievable – pending all requirements met.

Uses for Second Mortgage Finance

  • Pay creditors to stop a business wind up
  • Business Restructuring – closing one income entity and establishing a new trading ABN and entity.
  • Liquidation of a company – which also relates to business restructuring, when a company os liquidated and there are company overdrafts and business loans, these will usually need to be restructured under the new entity in a relatively short period of time. The short term nature of the income wont fit the lending criteria of traditional lenders.
  • Part or full payment of ATO debt – first mortgage refinance is the preferred method of funding ATO debt, however at times second mortgages are required if a pending judgement or court proceeding is imminent and funding cannot be settled in a satisfactory time frame.
  • Part or full payment of business debts such as outstanding invoices, business overdrafts, business loans etc.

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