If you require additional cash flow for your business or other personal reasons, using the equity in your property may be a viable option. Contrary to the thoughts of many, you can use personal real estate which has an existing mortgage as security for a loan provided there is equity available. A flexible lending criteria and fast loan settlement make second mortgages an effective alternative to mainstream lending.
A second mortgage is a loan taken out whereby the property being used as security already has an existing mortgage. Multiple mortgages can use the same property as security with priority determined by the order that they are lodged. As they are classified as a secured loan, second mortgages offer significantly lower interest rates than unsecured loans such as personal loans and credit cards.
Prior to taking an in-depth look at second mortgage loans, it is essential to understand the concept of home equity and how it applies. To get a second mortgage loan, you must have some level of equity available. To calculate the amount that you can borrow, you must know the following:
Second Mortgage Loan Example
The applicant owns a residential property that is valued at $2,000,000 and has an existing mortgage of $1,000,000. The lender specifies a maximum LVR of 70%.
Second mortgage loan amount that can be borrowed:
= (Value of Property – Existing Mortgage) x (70%)
= ($2,000,000 – 1,000,000) x 0.7
= 1,000,000 x 0.7
= $700,000
In this example, the applicant would be able to borrow up to $700,000 with a second mortgage loan. Prospective applicants should be aware that they may have equity available in their property even if they are yet to repay a significant amount of the principal debt. Beneficial fluctuations in real estate prices can create equity in your property that you never knew you had.
The characteristics and features of second mortgage loans are highlighted by two key aspects, namely the lending criteria and application process.
Lending Criteria
A significantly more flexible lending criteria than traditional lenders such as banks is one of the key reasons for the increase in use of second mortgage loans. Unlike mainstream lending institutions, Simply Funds is open to lending to applicants with bad credit or a low credit score. As a low-doc loan, applicants are not required to submit an exhaustive amount of detailed financial documents. A loan-to-value ratio (LVR) up to 70% ensures wide lending parameters while the line of credit type facility, similar to a home equity loan, provides an interest only option on repayments.
Application Process
At Simply Funds we pride ourselves on being able to provide an obligation-freeapplication process that can be completed in minutes. No credit score checks are conducted for pre-approval and desktop property valuations prevent any unnecessary delays. These characteristics place us in a position where we can approve a second mortgage application and provide funds within 48 hours.
Knowledge of common uses and potential benefits will allow those looking to get a second mortgage to make an informed decision. Second mortgage loans are often used for the following purposes:
Second mortgages provide numerous benefits when compared to other loan products. They include:
Getting a second mortgage loan with Simply Funds is easy. As is the case with all our loan products, the online application process can be completed and submitted in just minutes. It takes a handful of steps to get the finance you need and best of all, we do not require formal valuations or detailed financial documentation.
Once you have submitted an online application, one of our lending specialists will contact you to obtain some basic information. They will help determine your requirements and ask some basic questions regarding your assets and liabilities. They will then conduct a desktop valuation of the property being used as security and prepare the loan documents. Once signed, the loan is processed, and the funds made available to you. Submit an online application today and find out if you are eligible to get a second mortgage loan with Simply Funds.
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August 16, 2022
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When seeking funding in the form of a loan, it is important to understand a range of key concepts that apply to lender assessed financial products.
Challenges are a daily occurrence in the world of business. More often than not, business owners mistakenly view these challenges as an obstacle rather than an opportunity.
When it comes to short term business finance, one of the most difficult tasks faced by business owners is finding the product that will best suit their needs.
If you require additional cash flow for your business or other personal reasons, using the equity in your property may be a viable option. Contrary to the thoughts of many, you can use personal real estate which has an existing mortgage as security for a loan provided there is equity available.
The world of business continues to evolve, and the lending space is no exception. There is an increasing demand for secured loans which has brought about changes in many areas.
Whether to invest in working capital, upgrade premises or facilities, purchase equipment or buy property, a second mortgage loan (or Caveat Loan) can provide money in less than a week from application to released funds.
Getting a business loan with major financial institutions such as banks can take weeks, or even months. Simply Funds has this problem by providing fast loans for business.
Securing funding through traditional lenders such as banks can be a lengthy and rather complicated process.
A low credit score is not the end of the road
Throughout the course of running a business owners are faced with difficult decisions and constant challenges. Among those are decisions relating to cash flow management, and more specifically, business finance.
Caveat loans (https://simplyfunds.com.au/blog/fast-caveat-loans/) are a financial solution for businesses, particularly useful for start-ups and commercial property investors. A caveat loan is a fast funding loan that is secured against a property. I
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A Bizcap provides both Unsecured and Secured loans to Small Business Owners. When assessing a loan application Bizcap generally doesn't take into consideration if a prospective customer has specific assets to provide as security. However:
(a) if the loan amount is above $30,000 (or any other figure which Bizcap determines from time to time), Bizcap will, under the loan agreement take a charge. For a corporate borrower and any corporate guarantor, the charge is over all of that entity's present and after-acquired property (that is. the security is not over specific assets but any and all assets which the entity may have). For a sole trader borrower and any individual guarantor, the charge is over its current and future real property; and
(b) in certain instances, for example, where the loan relative to the cash flow of the borrower is of a size that warrants the provision of security over specific assets. Bizcap may require specific security to be granted over those assets. Bizcop may register its security interest(s) under relevant legislation, including the Personal Properties Securities Register and the register held under the Real Property Act 1900 (NSW) or Its equivalent.
I n addition. Bizcap may take personal guarantees from directors of corporate borrowers, directors of corporate guarantors and certain individuals. No registrations are made in respect of guarantees.
Simply Funds operates an online information service that seeks to introduce Australian businesses to potential funders. Simply Funds does not provide any credit, financial products, or financial advice – either to individuals or businesses.
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