A second commercial mortgage is a loan taken out by a borrower in addition to their first commercial mortgage loan . These loans typically include a term of at least five years and interest-only payments.
Having two commercial mortgage loans can be expensive, so it is important you understand the reasoning behind taking out a second mortgage loan and are sure you can afford payments before you decide to do so. A commercial mortgage calculator is a great tool you can use to help you estimate your budget.
Borrowers can use a second commercial mortgage as a more common strategy of qualifying for a first loan on a property that they do not yet have enough cash for. As an example, consider the following scenario:
You are required to make a 30 percent down payment on a loan because the other 70 percent of the Loan to Value (LTV) ratio will be covered by a
lender. However, you only have 20 percent of the value of the property available. You may take out a second commercial mortgage loan on the 10 percent that you do not have in order to qualify for the first loan.
By using the second commercial mortgage to help you qualify for the first one (by having more cash to contribute to a down payment) you may secure your property and then defer the costs of your second mortgage until that property has appreciated in value. At that later date, a commercial mortgage refinance and consolidation of both loans into a single payment will help you to pay down all of your debt more easily.
You can shop around for a competitive rate to make sure your second commercial mortgage won’t be a business mistake down the road. After all, this is a significant investment to your business that you’re making here.
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