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Commercial Second Mortgage - A commercial second mortgage is a popular option these days, as businesses are looking to consolidate debt, and borrow against the equity of their building.

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A commercial second mortgage is a popular option these days, as businesses are looking to consolidate debt, and borrow against the equity of their building. There are many more properties up for sale at the present time, and ironically, the selling price has increased as well. For a firm seeking an additional site, having the available financing can help to reduce the anxiety of the cash outlay. Of course, this type of financing is not always prudent for those companies that don’t have a tremendous currency flow at the current time.

There are many reasons to seek a commercial second mortgage, and one of the best is to avoid refinancing the first loan (if there are no problems with it). By performing this kind of action, there isn’t the need to get an appraisal (which typically can range from $2500 to $4000), or an environmental report ($1000 to $2000). So by simply getting the second loan, there are no high prepayment penalties on the first one. That in itself would be enough to convince many businessmen of the viability of this type of strategy. However, more rationale exists that make can help to persuade even the most stubborn of individuals.

With a commercial second mortgage, there are no title or escrow fees, as well as no appraisal or environmental fees either. The only cost associated with this type of arrangement is the origination fee which usually runs between 1 – 1.5% of the money borrowed. It is paid at the time of funding. The low documentation requirement is also an attractive part of the rationale for borrowers to complete this transaction. A proof of insurance and a copy of the last mortgage payment is all the paperwork needed to start the process in motion. No business or personal tax returns are necessary from the owner-occupants in order to complete the deal. Finally, interest rates are typically in the low 8% and sometimes 7% range for those borrowers who qualify.

There are many lenders at this time who offer these type of financial services. One of them – Nationwide, is based in California, and can offer a commercial second mortgage for those firms that qualify; regardless of past credit problems. They provide a way to consolidate the outstanding loans, and still be able to finance new investment properties.

A new commercial second mortgage gives a business owner the ability to make use of the already acquired equity in their current building. With the fixed interest rate, it represents an attractive option for gaining additional liquidity without having to go through the hassle of a second bank loan. This solves one of the biggest negatives facing most larger corporations today: having to find enough available money to acquire some needed assets. It can be used as a down payment, to put money back into the main business, or to rehab another property. These are just some of the good ways to use this surplus.

In order to qualify for a commercial second mortgage, a borrower needs to meet certain criteria in order to receive the money. The first and most important is the credit score number. This must be at least 700 even to qualify for this process. The next step is having the company finances inspected to see if the ability to repay the loan is possible. For those firms that don’t qualify, they are free to try another firm.

There are also some important details regarding the second mortgage that every firm needs to be aware of before starting the lending process. This type of loan will sit in the second lien position behind any lender or loan program, with a closing time of about 35 days. The maximum amount of money that will be lent ranges from $200,000 to $500,000, with rates as low as 7.12% annually. The fixed periods are set at 5 to 10 years, with an amortization schedule between 25 or 30 years (this is left for the borrowers to decide).

A commercial second loan is a good way for a firm to borrow money against the value of their building in order to gain needed liquidity. This capital can then be used for a number of purposes – whatever is deemed best by the company.

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