Hard money 2nd trust deeds are popular amongst business owners and real estate investors due to their ability to tap into a homeowner’s equity without having to refinance their entire property. For example, when a property owner has a low-rate 1st mortgage and doesn’t want to touch that loan, they would inquire about a 2nd trust deed or 2nd position loan due to us recording behind your existing 1st mortgage. Below we will outline the benefits and when an individual may use this type of loan.
What is a 2nd Trust Deed?
A 2nd trust deed or a 2nd position loan, is a lien that records behind an existing 1st mortgage. Business owners and real estate investors can utilize this type of financing by tapping into the equity in their properties. This can provide a quick source of capital to utilize time sensitive opportunities.
What Property Types Does a 2nd Trust Deed Cover?
A second trust deed can be made on both commercial and residential properties. Additional property types can be found below:
- Single Family Homes
- Condos & Townhomes
- 2-4 Unit Properties
- Apartment Buildings
- Mixed-Use Properties
- Office Buildings
- Retail Buildings
- Industrial Buildings
- Medical Buildings
How Much Can I Borrow with a 2nd Trust Deed?
Loan amounts can be arranged as little as $50k and up to $4 million depending on how much sufficient equity is in a borrower’s property.
What Can I Use a 2nd Trust Deed for?
Whether you’re a business owner or a real estate investor, reliable working capital is an important need. Below are some examples of what a 2nd trust deed can and may be used for:
» Business Owners
When running a business, there are often many unaccounted expenses and operating costs that may arise. Business owners may use the equity of their home in the form of a 2nd trust deed to use as working capital to continue to focus and grow their business.
» Real Estate Investors
Real estate investors are always looking for the next opportunity to jump into the next deal. 2nd trust deeds for real estate investments are a great tool for investors to utilize their existing properties, to have funds ready to purchase additional real estate or fix up another one of their properties.
» Business Partner Buyout
Most of the time, a business partner buyout is a time sensitive situation. If a partner and you own an income producing property together, a quick equity driven 2nd trust deeds may be a perfect solution. Rather than go to the bank, if the property has significant equity, TrueBridge Loans can get you quick financing for the buyout, to then help you drive focus back to generating income for your businesses.
» Developers
Developers often face challenges of budgeting for unaccounted expenses on their real estate deals. A second trust deed can offer developers access to capital to fund new projects as well as complete existing ones. Furthermore, developers are constantly looking for opportunities to capitalize on, whether it is purchasing land for a new project or buying materials for an upcoming one a 2nd trust deed can offer you the funds you may need.
Is a 2nd Trust Deed a HELOC?
A 2nd trust deed is a different type of loan then a HELOC.
» What Does HELOC Stand for?
A HELOC or Home Equity Line of Credit is a type of bank financing similar to a credit card. It’s secured against a borrower’s property behind a senior mortgage and is treated as a revolving line of credit. The funds are used as you need and treated as a draw. Interest is charged on the amount that is used from the HELOC.
» What is the Difference Between a 2nd Trust Deed and HELOC?
The main difference between a 2nd trust deed and a HELOC is the speed in which the 2nd trust deeds can be funded as well as the entire funds being given all at once. With a 2nd trust deed, interest is charged on the entire loan amount because the funds are given all at once rather than with a HELOC, the funds are treated as a draw or line of credit.
How Fast Can a 2nd Trust Deed Close?
If all the stars align, a 2nd trust deed can be funded in as little as 7 days. The reason for this is because we are dealing with private investors and common-sense underwriting, rather than adhering to the bank’s strict approval process for a HELOC.
According to Lending Tree, the average time to close on a HELOC is 2-6 weeks, which could deter a borrower from closing on a time sensitive opportunity due to the funds not being readily available.
Is There Anything That May Disqualify Me from Getting a 2nd Trust Deed?
Since we’re an asset-based lender, the only thing that would disqualify you from getting a loan would be if the property value was not as represented, meaning that the value was simply not there or if the property had no equity. Property valuation plays a big role in determining what a 2nd trust deed loan amount will be or if the property is already tapped out in equity. Property valuation will be determined by an appraisal or internal valuation team.
Something else that may disqualify a borrower from getting a 2nd trust deed would be if there was no clear exit strategy. This is important because without a clear path of getting this type of loan paid off, it makes it extremely difficult to make a loan. It is important for all borrowers to come to the lender with a clear explanation on how they plan on paying off or refinancing a second position loan.
Summary and Consensus
All in all, there can be many advantages for yourself or your clients to get a 2nd trust deed. Whether it’s a time sensitive business opportunity or a real estate acquisition that needs to be capitalized on, our loan specialist at TrueBridge Loans is here to help as your Thousand Oaks second trust deed lender.
Feel free to reach out to us at (805) 719-7008 or email to see if an alternative financing solution is right for you!
