2nd-Mortgage

A commercial second mortgage is an important commercial real estate tool. Commercial second mortgages are often used in conjunction with a new first commercial mortgage loan. Typically, the commercial second mortgage will have a term of one to five years with interest only payments. While commercial second lien mortgage can be critical in some financing scenarios, consideration must be given as to whether or not you have the ability to service both loans.

The most common uses that we see investors employ with this loan is as property rehabilitation capital or as down stroke capital for new building acquisitions. Investors that have been involved in traditional commercial construction loans understand the extensive process/reporting requirements and like the idea of avoiding this, by pulling cash out of another property via a commercial second lien mortgage and use those proceed as the rehab capital on a another property.

Likewise, many investors do not want to tie up cash into an acquisition. Investors can pull cash out of an existing property and use that capital as the down payment on the new purchase, effectively buying the property with 100% leverage.

Many borrowers do not like the idea of a floating rate line of credit. Many business owners prefer having the security of a fixed rate loan that enables them to better predict/manage their costs of capital. Business owners have virtually no restrictions on the use of loan proceeds. Common uses include, purchasing equipment, launching advertising campaigns, investing in new technology, etc.

Whatever the use or intent of the borrower, this new commercial second mortgage provides a solid option and an additional financing tool for commercial property owners.