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As economic conditions tighten and credit becomes increasingly harder to obtain, many borrowers are turning to private lending for their business credit needs. Investing in second mortgages, as a secured form of low doc lending, can provide benefits to business owners. However, it’s important to note that these loans are only available to a company or trust applicants, which means borrowers are not afforded the same lending standards and protections as those provided in consumer lending. For this reason, among others, it’s essential to consider using a specialist second mortgage loan expert.

What is a Second Mortgage?

A second mortgage is a type of loan that is secured against a property that already has a first mortgage. In the event of a default, the loan secured by the second mortgage will be repaid after the first mortgage has been paid back in full. Second mortgages are offered by private lenders to business entities like companies or trusts this means they are not subject to the same regulations that apply to consumer lending.

The Importance of Choosing the Right Second Mortgage Lender

There is a significant variation in the fees, charges, and conditions that apply to loan contracts between second mortgage lenders. Additionally, some second mortgage lenders charge fees to provide due diligence even though they sometimes seem to have no intention of providing finance. We have had a number of clients tell us of how, before coming to, they had paid thousands in fees to lenders only to be told they don’t qualify for a loan.  

As a business owner, it’s crucial to be confident that your chosen lender has a track record of settling the size loan you’re after, against the kind of security you’re offering, at a competitive rate, and with fair fees and charges.

Case Study: Business owner rescued from insolvency and going out of business 

Our client ran a profitable business but at the beginning of Covid their revenue fell to a fraction of their monthly turnover when their region was impacted by lockdowns.

To manage cash flow during that time they had turned to a very expensive unsecured lender and a private lender they had found online.  The private lender looked past their cash flow challenges and was happy to provide them funding for their business. 

However, all was not as good as it seemed.  In addition to establishment fees, legals and valuation costs, the lender added a $25,000 ‘due diligence fee’ to the cost of the loan and was charging a higher rate of interest than could have been secured elsewhere.  

In addition, there was confusion about which account the borrower was to pay their monthly repayment – as a result their first monthly repayment was a day late.  The lender responded by charging more than $12,000 in fees for the late payment.  The borrower attempted to communicate with their lender and engaged a solicitor in an attempt to negotiate removing the fees but the lender responded by placing the loan in default.

It was at that point the client was introduced to us to refinance their loan to avoid further legal costs and lender penalty fees.

The Benefits of Using a Specialist Second Mortgage Loan Expert

While it’s possible to apply for a second mortgage loan without the assistance of a expert, doing so is not without risk. A professional second mortgage loan expert will be able to demonstrate experience with these kinds of loans and assist you in not only securing a lending offer with competitive rates but with a lender who also has a reputation for treating their clients fairly. An experienced second mortgage loan expert should have relationships with a range of lenders with different policies so you have the broadest solutions available.

In addition to sourcing the lender they should guide you through the process to make it simple and fast. It’s important to remember that a key component of lender selection is your confidence in the process and throughout the term of the loan. A specialist second mortgage loan expert should be there to assist you with your queries after settlement and help you manage your transition back to traditional lending solutions when your circumstances allow for it.

Choosing an expert to help you with your second mortgage

If you’re considering a second mortgage loan for your business, it’s essential to choose the right loan and lender, not just the right rate. A specialist second mortgage loan expert can assist you in finding the lender that can settle the funds you need, against the security you have to offer in the timeframe you need the funds.  They should guide you through the process, giving you confidence and be there to help you with your queries after the loan has settled. are expert second mortgage loan experts.  To help you with your loan and manage cash flow contact us here.

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