2nd Mortgage Loan Brokers Australia
Do banks offer second mortgages?
There are various second mortgage lenders in Australia. In brief, private lenders and conventional lenders both offer second mortgages. However, traditional lenders mostly use second mortgages for family guarantees. Plus standard strict lending criteria would still apply.
Loan Saver Network provides advice on private 2nd mortgages lenders and short term business loans. Specifically, information on private lenders and types of loans for ABN holders having difficulty obtaining funds. Therefore, allowing access to untapped equity in your home to assist with your business.
Additionally, your existing low rate home loans would remain with the current lender. Therefore the business finance would sit behind the current loan. However, what determines the best private lender when applying for a second mortgage?
What do I need to know about 2nd mortgage business finance?
- Firstly, interest rates - a higher interest rate can increase the cost and ability to maintain repayments. Also, as the interest rates decrease, so too can the loan amount available against your property. Hence, the lender with lower interest rates could have tighter lending policies.
- Secondly, most clients seeking business finance need the funds quickly. Therefore, in most cases, the speed of loan settlement is essential. Such as when you need to pay a creditor urgently to avoid legal action.
- Thirdly, loan amount available against your property (LVR - loan to value ratio) - which determines the loan amount. Hence a lower loan amount can restrict the surplus funds to you.
- Plus, establishment fees - each lender has their own set of prices to establish a second mortgage loan. At the same time, the fees charged can vary considerably between the lenders. Given these points, thought should be given to a fee comparison to ensure a well-priced product.
- Finally, short term trading business - in some cases, a client is seeking to set up a business using real estate equity. Therefore, you would need to apply for an ABN before any loan application.
Low Doc Second Mortgage Loan
Have you not completed your business financials and tax returns? In this situation, caveat and second mortgage loans don't require financial statements.
Secured debt consolidation can help pay business debts that pose a risk of bankruptcy and business closure. For that reason, prevent insolvency caused by tax debts or other business debts.
24-hour settlements are available using a caveat; backed by a second mortgage.
Purposes For Second Mortgage Finance
Secured business loans have many uses well suited to business requirements. Also, personal or consumer purposes are mostly limited to family equity guarantees. As such, we find the business use for second mortgages falls into two main groups:
Finance for Business Cash Flow & Working Capital Purposes
- Firstly, accessing a home equity loan secured against your home for working capital purposes. In essence, a facility limit would be provided based on the Loan Ratio (LVR) available against your property. In that case, a home equity line would allow you to pay "interest-only" on the funds used.
- Secondly, accessible for ABN holders such as sole traders, partnerships, company structures, and trusts.
- Furthermore, a small business loan could be used for working capital to keep trading.
- At the same time, when your business has insufficient income evidence available. Especially, incomplete business financials or you have been trading for a short time.
- On the other hand, they are used for business restructuring, consequently closing one entity and setting up a new trading ABN entity.
- Not to mention, voluntary liquidation of a company. Therefore, needing the restructuring of overdrafts and business loans under a new entity. Consequently, the short term income won't fit the lending criteria of traditional lenders.
- Even more, obtain finance for buying a second property for business use.
- Additionally, repay the loan with a lump sum at the end of the term; or via ongoing monthly payments.
- Finally, loan amounts of LVR of 75% however, in some cases, higher LVR's depending on the strength of your loan application.
Bad Credit & Business Debt Purposes
- Firstly, payment of business debts such as outstanding supplier invoices, business overdrafts or loans.
- As well as, pay creditors to stop a court-ordered business wind up, or creditors petition.
- Not to mention, consolidating personal liability such as a credit card or personal loans. However, personal debt must be less than 50% of the total loan amount. Indeed, the loan must be for the majority business purpose.
- Then, business loans to pay GST or tax debts, as traditional lenders won't to offer loan approval.
- Especially, pay money owed to creditors or critical suppliers.
- Not to mention, where credit checks show credit defaults preventing funds from traditional lenders.
- Finally, to pay mortgage or rates arrears.
Speed and lender policy determines the most suitable solution
Conventional banks actively search for self-employed borrowers with tax debt. As they don't want any borrowers with tax debt as it highlights a business income and mortgage with higher risk. By and large, second mortgages and specialist loans can pay a tax debt. Plus are useful for fast loan settlements when an ato court judgement or bankruptcy is pending.
In that case, second mortgage & private finance can offer fast access to funds where traditional lenders are not interested. In summary:
- Firstly, If speed is critical, then caveat loans are a preferred option.
- Also, Second mortgage finance is preferred if traditional lending policies would not allow access to funds
- Finally, a first mortgage refinance is usually the preferred way of paying tax debt when time is available.
Loan Saver Network offers advice about second mortgage loans and private lenders to solve business debts. As such, contact our team for a free consultation on 1300 796 850.
What equity do I need for 2nd mortgage finance?
Short term business loans such as caveat loans and second mortgage loans are higher risk for a lender. As such, this is a result of minimal income and other credit requirements. Consequently, to reduce lender risk, lenders require more equity.
Private lenders usually require 25% equity; or a maximum 75% LVR inclusive of fees and capitalised interest. In some cases, you may obtain capitalised loans payments. For the same reason, risk reduction would require a strong exit strategy along with your ability to meet payments.
Example of Property Equity using a second mortgage.
A second mortgage sits behind the first mortgage registered against the title of your property. Consequently, second mortgage finance allows access to equity without the need to refinance the first mortgage.
As the first and second mortgage loans are separate facilities'; there are still equity limitations. Let's look at this example:
- Home Value - $500 000
- Minus what you owe - $100 000
- = Equity - $400,000.
Given that, private finance can access a portion of the $400,000. In particular, without a need to refinance the home loan.
The first mortgage will have a priority interest. For that reason, if a lender forces the sale of a property, then the first mortgagee would be paid out first. Next, the remaining funds would pay subsequent mortgages or caveats.
Private mortgage finance can be an effective method of obtaining fast business funds. At the same time, traditional lending can be a hinderance because of tight policy guidelines. As such, private lender policies are more flexible than conventional lending. However, 2nd mortgage loans need to be practicable for the businesses requirement and purpose.
Second Mortgage Lending Criteria
The lending criteria for private lenders varies considerably with traditional finance. By comparison, businesses enjoy the simplicity of the loan process and lending criteria. Especially so if you need the funds urgently. See below of the lending criteria of second mortgage business finance:
- Business Purpose only. Importantly, second mortgage finance must be for >50% business purpose only.
- Secondly, there is a range of low doc income requirements, including asset only loans.
- Thirdly, short term and start-up business ventures with one day ABN registration.
- In particular, tax debt payment and other business debt use.
- Equally important, is that some private lenders don’t require valuations
- Also, credit defaults, court judgements and various insolvency can be accepted.
- At the same time, no or insufficient income evidence available.
- Importantly, fixed interest payable for the loan term. However, some lenders offer variable rates.
- Finally, to pay mortgage or rates arrears.
How Fast is a Second Mortgage Settlement?
A second mortgage needs to be approved by the first mortgagee; which, at times, can take as long as a refinance. However, while waiting for the second mortgage to be approved, you can still have access to the funds.
Caveat security can be registered while waiting for the second mortgage to be registered. In that case, this can allow for swift loan settlements of 24 - 48 hours.
Uses for Second Mortgage Finance
- In the first instance, pay creditors to stop a business wind up.
- Then, business restructuring and requiring finance. Hence, specialist finance is needed as you are 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.
- Indeed, private loans can allow for partial payment or full payment of ATO debt.
- Importantly, avoid the complex lending policy for fast access to money.
- In sum, traditional lenders don't like risk, such as legal proceedings. Consequently, business legal or court action is a suitable purpose.
- Finally, used for the payment of business debts such as supplier invoices, business overdrafts & business loans.
Loan Saver Network specialises in private second mortgages and caveat loans; plus fixing business debt issues. However, we also recommend our clients obtain financial advice and legal advice on all specialist loans.
Contact Loan Saver Network for finance & debt advice on 1300 796 850 today.
Let's talk about a solution that suits you
Second mortgage loans - are they risky?
A business mostly uses second mortgage loans. As such, second mortgages have substantial benefits for a business requiring funds fast.
Private mortgage loan funds are usually short term loans. As such, you would require a well thought out exit strategy to pay back the funds.
Private loans can provide significant benefits for business.
- Firstly, you don't fit the lending criteria of traditional or other lenders.
- 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 from traditional lenders. As such, the private lending criteria are more flexible. Therefore, able to provide business funds where conventional loans would not be possible.
- Firstly, private second mortgage finance is for business purpose only.
- Second, limited income assessment is required.
- Thirdly, suitable for a start-up business – 1 day ABN registration (ABN loan facility)
- 2nd mortgages have higher interest rates than traditional lenders because of the higher risk; and reduced income and credit requirements.
- Also, payment of tax debt and other business debts ok.
- 2nd mortgage equity lines of credit are available. For instance, where a set facility limit can be drawn up or paid down as required.
- Also, most loan facilities have a fixed rate for the term of business finance.
- Finally, no valuation required in some cases.
A second mortgage needs to be approved by the first mortgagee; which can take some time. Consequently, to increase the speed to access funds; a caveat is lodged while the lender negotiates with the first mortgagee. As such, once the caveat is lodged the funds are provided.
Consequently, the loan starts as a caveat loan and ends with a second mortgage which allows for fast loan settlements.
- 24-48 Hour settlement achievable – pending all requirements met.
Second Mortgage Finance in Summary
- Firstly, pay creditors to stop a business wind up
- Secondly, business restructuring – closing one income entity and establishing a new trading ABN and entity.
- Thirdly, liquidation of a company and you require business overdrafts and other loans to be closed. Therefore, refinancing business loans and debts under a new entity. Therefore, traditional lending criteria won't accept the short term nature of the new income entity.
- Also, payment of ATO debt is a suitable purpose for private mortgage finance. However, the tax debt must be more than 50% business purpose such as tax debt from company income tax or GST.
- Otherwise, if the tax debt is a personal debt, then you may need to refinance a home loan to pay the tax debt.
- However, second mortgages and private finance is useful when you are unable to meet the complex policies of traditional lending.
- Also, Caveat loans are preferred when speed is critical. Such as if there is a pending ato judgement or court proceeding and a refinance cannot be settled in time.
- Part or full payment of business debts such as outstanding invoices, business overdrafts, business loans etc.
- 75% LVR available inclusive of closing costs
- Related Information on second mortgages.
Loan Saver Network offer advice on a 1st mortgage, 2nd mortgage and caveat business loans. Call 1300 796 850 to discuss your business finance solution.