Commercial Equity Loan, Top 10 Benefits
The Commercial Second Mortgage is one of the most innovative commercial loan programs to be offered in decades. Designed for the “small” commercial borrower (investor or owner occupants) it is an excellent way to unlock equity. Loan amounts range from $100,000 - $500,000 on virtually all commercial properties. Benefits include:
1. Commercial Equity Loan Sits in Second Lien Position Behind any First.
No need to pay off or refinance existing mortgage to get access to equity. This small commercial mortgage sits in second lien position behind any first commercial mortgage.
2. This Small Commercial Loan Enable’s Owners to Access Equity Efficiently.
Historically, owners had very few options of accessing their equity. Options, if any, were very expensive (requiring full underwriting process) and cumbersome loan process. If borrowers could get a second mortgage, the lending institution almost always had to hold both the 1st and the 2nd loan. The borrower would have to settle with whatever option the first position lender offered.
3. No 3rd Party or Upfront Fees.
As hard as it might be to believe, there are no third party fees on this commercial second mortgage. Typical commercial loans have an appraisal fee ($2,500 – $4,500), environmental report fee ($2,000), and title fee ($1,500 - $2,500) totaling between $6,000 -$10,000 per loan. The borrower does NOT have these or any other upfront fees with the commercial second. The only fees are an origination fee (1-1.5%) paid at close, normally out of the proceeds of the loan.
4. Option of Fixed Rate or Equity Line of Credit.
Borrower has the option of picking a fixed rate second or an equity line of credit. The most popular fixed periods are either 5 or 10 years with amortization schedules of 30 or 25 years. The commercial equity line, is interest only and the borrower can pay down/bring the balance up as s(he) sees fit.
5. Streamlined Process – Low Documentation.
Due to technological advances, the process is highly simplified compared to a traditional commercial loan. In addition, the low documentation requirements simplify the process for the borrower. For example, there’s no business or personal tax returns required for owner occupants. Typically only proof of insurance, and a copy of the last mortgage statement/payment. For investors, you normally only need to provide copies of your schedule E’s (last 2 years), proof of insurance, copy of leases and a copy of your last mortgage statement. That’s normally it.
6. No Need to Refinance to Simply to Cash Out.
Many borrowers are forced to go through a cash out refinance to pull equity out even though their existing first mortgage is acceptable. Costing the borrower thousands of dollars and resetting the interest amortization schedule. With this second lien position loan, simply put a line or fixed rate second on top of your existing loan to unlock your equity.
7. Simple Application, Borrower is Approved Within 72 Hours.
The application/form takes 5 to 10 minutes to fill out. It’s one and half pages. Borrower will normally have an approval within 72 hours after application is turned in. The approval letter states exactly what the terms of the approval are, so the borrower knows exactly what they're dealing with. Closing time is typically 30- 45 days.
8. Equity Loans Offers Evergreen Contract.
Commercial Equity Loan offers an Evergreen Contract – meaning that there is no due date when the line has to be closed or restructured. Compare this to a tradition bank line with balloons typically of 3 years. Make monthly payment and the commercial equity loan goes on indefinitely (a few states have restrictions).
9. Loan Offered by One of the Largest Banks in the World.
One of the largest banks in the world came up with this innovative commercial second loan, giving the borrower piece of mind that they’re with a credible institution.
10. No Reporting.
Traditional commercial bank loans require monthly or quarterly financial reporting, such as profit and loss statements, balance sheets, etc . The purpose of this is to monitor the business. If the bank does not like the trends of the business, they hold the right to call the note – forcing the business/investor to pay off the loan immediately or go into default. The Commercial Second Mortgage does not require reporting and as long as the borrower makes their payments, there’s no concern of having their note called.
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