Need some additional finance but have been declined by your existing first mortgage lender for a further advance? Have equity in their property and require further funds to pursue an opportunity. Cannot unlock their equity as the existing first mortgagee feels that the borrower is at their limit, either due to the loan to valuation ratio or due to being too skinny on serviceability .
One option is to refinance and to obtain a larger loan that meets your needs or obtain a further loan from a second mortgage lender.
At Commercial Mortgage Broker will assess your options and provide you with the most effective and cost efficient solution.
Second Mortgage FAQs
What is a second mortgage loan?
Second mortgage means that you are applying for another loan with the same property as security.
A second mortgage loan allows borrower an access to funding that allows lender to charge over a property on an asset of second interest that is already secured. A single property can be secured against multiple mortgages, and are ranked in the order they are lodged.
In the circumstance whereby the borrower defaults, the first mortgage lender has primary rights over the secured property and is paid back money before subsequent mortgage lenders.
Why is second mortgage more expensive than first?
A second mortgage bears more risk for the lender than a first mortgage lender. In the event of a default by the borrower, the first mortgage owner gets primary rights of the secured property and will be paid first as and then the second mortgage lender. That is the reason second mortgage are more expensive.
How does second mortgage in Australia works?
Let’s assume you have a $600,000 mortgage on a home with Lender A and you apply for a second mortgage of $200,000 on the same home with Lender B. If you couldn’t pay back the loans and the property was then sold for $850,000, Lender A would be repaid in full and Lender B would only receive any amount that was left over.
Because of the complexities of two lenders being involved and the low priority of the debt in the event that you default on your loan, most banks limit the amount you can borrow or refuse to do business with you.
How much can i borrow?
Usually you can borrow up to 60-80% Loan to Value Ratio (LVR) of the property value.
Why should I take out a second mortgage?
One can take second mortgage on a property to access the equity, in case he is unable to refinance. Sometimes it makes sense to get a second mortgage when are constrained by time or your first mortgage is fixed and the breakaway is significant.
Second Mortgage over the property is sometimes taken parents to guarantee the loan for children buying their first home.
What can I use second mortgage loan for?
In Australia, you can use second mortgage loans for starting a new company/business, expanding your existing business, covering unexpected business costs, buy additional business equipment, renovating or rebranding business and more.
Is it quick-and-easy process to get second mortgage?
It really depends upon the lender that hold the first mortgage. The first mortgage lender may not allow a second mortgage.
Different banks have different requirements, most don’t usually stop you for taking a second mortgage.