Second Mortgages

[Erin Woods]

Are there any lenders who are willing to provide a second mortgage on a property?

i.e. go on title as the second mortgagee??

I am in the situation of having an IP with 600k equity but a fixed loan against it. Would like to avoid break fees. Existing lender v. limited on top ups/cash out.

 

[Peter_Tersteeg]

There's quite a few lenders who would take a second mortgage.

The combined LVR wouldn't go above 80%. The first mortgagor would also have to agree with it. Some lenders won't agree to it, especially if they do feel your serviceability is limited.

There's been significant discussions on 'the order of lenders' and the common thinking is to use the low servicing lenders first, leaving the more generous lenders until later.

This is a good example of why I suggest that this approach is somewhat flawed.

 

[JDM]

There are a lot of mezzanine lenders that do this. It usually involves a deed of priority being entered into with the first mortgagee and higher interest rates.

 

[Mick C]

If your looking for CASH out on a 2nd mortgage...it will probably cost you a lot more VS breaking your fix...

Even though there's a cost to break...you will be on a lower rate( hopefully) which will absorb some of the break...not all.

 

[Brady]

Second mortgage are not ideal.

Done a few for 'Family Gaurantees'.

There are usually better ways around what you're looking to do, but sometimes not all will agree.

Don't expect anything to be completed very fast, involving 2 banks. Preperation of the Deed of Priority (DOP) by the bank wanting to go 2nd mortgage, send to 1st mortgage bank and assessed by them, followed by accepted documents being sent back... then those documents to be processed. And to top it off usually 1 of the bank stuffs up the documents.

Enjoy

 

[Redwood]

Are there any lenders who are willing to provide a second mortgage on a property?

i.e. go on title as the second mortgagee??

I am in the situation of having an IP with 600k equity but a fixed loan against it. Would like to avoid break fees. Existing lender v. limited on top ups/cash out.

Check these guys out rates and service attached-
http://www.vernonsolicitors.com.au/snapshot.pdf

 

[Corey Batt]

Have you called up the lender to get a quote of breaking the fixed rate? This can be anywhere from nothing to the moon, but depending on the rate spread it may be manageable. Considering the rate difference between your existing interest rate and a new much lower rate you may actually come out ahead.

Attempt to get the incoming lender to cover some of the costs and this will only help the margins.

 

[Erin Woods]

Have you called up the lender to get a quote of breaking the fixed rate? This can be anywhere from nothing to the moon, but depending on the rate spread it may be manageable. Considering the rate difference between your existing interest rate and a new much lower rate you may actually come out ahead.

Attempt to get the incoming lender to cover some of the costs and this will only help the margins.

Good idea
Sometimes I tend to overlook the obvious. I remember back to GFC when I fixed in a rising rate environment at 9% and then rates fell to 5%. I got a break fee quote and got it in my head that you never break a fix....

Vastly different now.

 

[hello1234]

Hi Erin,

There are private lenders out there providing "secured" loans via "caveats" - which bypasses the hassles of Deed of Priority, mortgage registration, etc.

As most of these private lenders will only lend to businesses (e.g. companies, sole traders, etc) because they choose not to be regulated under the NCCP.

Interest rates and setup fees however are at a premium.

Thank you.

 

[Greg Reid]

Erin,
Not sure who your existing lender is, most will go to 80% with minimal questions on 'cash out', just a declaration of purpose.

Another option is to cross securitise if you are looking to buy another property, not always ideal but it keeps the fixed loan in place and should release equity. Refinance to another lender once fixed term is up.

As Corey suggests, get a quote but fixed rates are low at present so it may be a hefty cost depending on what your current rate is.