you are unable to obtain 100% finance from your main financier, and
you either do not have, or do not wish to pay, the 5% to 20% deposit
required to secure a property, nor do you wish to secure the deposit
funds via a joint venture
agreement, then you can offer a second mortgage on the
property to another party.
with your first mortgage, your alternative lender will be registering
an encumbrance and interest on the property title, thereby securing
their lending against the property asset.
This can be a somewhat tenuous position for the second mortgage
lender. If a repossession and foreclosure is effected by the holder of
the first mortgage over the property, and if there are only sufficient
funds released from the sale to cover the first mortgage, the second mortgage
holder will miss out. As a result, you will generally pay between a 1%
to 4% higher interest rate on second mortgage money to compensate them
for the added risk.
can second mortgage funds be found?
solicitors’ offices lend second mortgage money on behalf of
private investors. Simply open up your Yellow Pages and call around
until you find some that do.
again, some brokers may be able to refer you to solicitors who offer
second mortgage money, or alternatively, may be able to refer you to
other sources of second mortgage money.
may wish to negotiate a second mortgage with the vendor of the
property you are purchasing. Obviously, you will need to make it
worth their while, so be prepared to offer them up to an additional
4% over the standard variable rate at the time. You can always
refinance the property and pay them out as soon as you have
sufficient cash/equity to do so.
explore further the possibilities of using second mortgage money, find and speak to a solicitor
with experience in this area.