Hard Money 2nd Loans & Trust Deeds

Hard Money 2nd Mortgage Lenders for California Real Estate

Wave Private Money is a Nationwide direct hard money broker with more than 20 years of hard money lending experience and is one of the few 2nd mortgage hard money brokers in the country able to provide both business and consumer purpose hard money 2nd loans. Wave Private Money provides quick approval and funding, competitive rates and fees, and excellent customer service (READ REVIEWS).

Wave Private Money can provide hard money second trust deeds (California only) up to a combined loan to value (CLTV) of 60-65%. 2nd position hard money loan requests of $20,000 to $250,000 can be considered. Hard money 2nds are available on investment property (2nd position commercial loans) and owner-occupied property for business and consumer purposes. Contact Wave Private Money now to inquire about a private 2nd mortgage.

Hard Money 2nd Mortgages – 2nd Trust Deed Brokers

2nd Position Hard Money Loans

2nd mortgage hard money lenders can provide 2nd position hard money loans to property owners with sufficient equity in their property. In these situations, the property owner typically has a low-interest 1st mortgage they want to keep in place but need to pull equity from the property quickly. The borrower is often looking to use the 2nd position hard money loan to take advantage of an investment opportunity or solve an issue they are dealing with. 2nd position hard money loans are only intended to be a short-term solution, and the borrower needs a long-term plan. The private 2nd mortgage allows the borrower to keep the long-term loan in place and still borrow against the equity in the property.

A hard money 2nd mortgage is requested to borrow against existing equity in a borrower’s real estate. 2nd mortgage hard money lenders provide funding much quicker and with fewer regulations than traditional lenders. Borrowers typically obtain a hard money 2nd loan because they need fast funding or can’t currently obtain a 2nd loan from a conventional lender.

“Hard money” refers to the source of the funds that are being borrowed. Hard or private money loans come from private investors instead of traditional lending institutions such as banks and credit unions.

“2nd” refers to the loan position recorded against the real estate. If the property already has an existing loan against the property (1st), any subsequently recorded loan against the property will be in the 2nd or junior position.

What is a Second Trust Deed?

A second trust deed is a loan or mortgage recorded against real estate behind an existing loan (first). A second trust deed is also known as a junior lien. The timing of the recording of the loans against the property determines the priority (the first recorded loan is senior). A hard money second mortgage, home equity line of credit, or home equity loan are the most common examples of second trust deeds.

Second trust deed loans are more challenging to obtain as they are riskier for the second trust deed lender. Suppose the borrower stops making payments on the loan against the property. In that case, the lender in the first position can foreclose on the property, which would wipe out any other loans (second trust deeds) recorded after the first mortgage was recorded. The second trust deed lender could lose their entire investment. The second trust deed lender could make payments on the first mortgage to keep it current and then foreclose on the defaulting borrower from the second position. This requires the lender to have sufficient cash available to save their second position loan.

Due to the increased risk in this situation, second trust deed loan rates are higher than for a loan in the first position. Second trust deed loans also typically have a lower loan-to-value limitation than first loans. This attempts to reduce the risk for the second trust deed lender by requiring the borrower to keep a certain amount of equity in the property.

2nd Mortgage Hard Money Loans for Bad Credit

2nd mortgage hard money loans can be obtained for borrowers with less than perfect credit and other issues. Hard money lenders who provide 2nd position loans can typically overlook issues on a borrower’s record, such as bad credit, short sales, loan modifications, bankruptcies, and foreclosures. As long as the real estate serving as collateral has sufficient equity relative to the requested loan amount, the 2nd trust deed lender can still consider providing the loan. If the 2nd loan is considered a consumer purpose, the borrower must prove their income and qualify based on their debt-to-income ratio. This is required due to current federal regulations, which even 2nd mortgage hard money lenders must comply with.

In some instances, a 2nd mortgage hard money loan can expedite the repairing of the borrower’s credit scores when used for debt consolidation. The hard money 2nd can refinance high-interest debt (20%+) to a more reasonable interest rate when used as a debt consolidation loan. Interest rates for secured debt (loan against real estate) are typically less expensive than unsecured debt (credit cards).

2nd Trust Deed Loan Rates

Hard money 2nd trust deed loan rates will be higher than interest rates for a 1st due to the increased risk to the lender. A 2nd behind a large 1st presents a great deal of trouble to the lender of the 2nd. If the borrower does not make payments on the 1st loan, the lender of the 1st may foreclose on the borrower, at which point the lender of the 2nd will have their loan wiped out. The extra risk for the lender in 2nd position is the reason for the higher interest rate.

Expect interest rates for California's 2nd trust deeds to be 10-13%. The rate will depend on various factors, including the specific lender, strength of the borrower, CLTV being requested, and property location.

Hard Money 2nd Business Purpose Loans vs. Consumer Purpose Loans

Most 2nd mortgage hard money lenders can only provide business purpose hard money loans. Wave Private Money can provide business purposes (2nd position commercial loans) and consumer purpose hard money loans.

If most of the borrowed funds will be used for business purposes (investing in or starting a business, purchasing investment real estate properties), the loan will be considered business purposes. If most of the borrowed funds will be used for consumer purposes (remodeling the primary residence, personal debt consolidation, purchasing a boat or RV), the loan will be considered a consumer purpose.

Hard Money 2nd Loan – Investment Property vs. Primary Residence

The type of real estate used as collateral for the 2nd mortgage does not determine whether the loan is considered for business or consumer purposes. A 2nd mortgage against a commercial property to pay off personal credit cards would be a consumer-purpose loan. A 2nd mortgage against a primary residence to purchase equipment for a business would be a business purpose loan.