Self-employed real estate investors often use their primary residence as collateral for fast closing short-term loans. These loans provide cash for other projects they’re working on. First Capital Trust Deeds secured financing for this business purpose hard money second trust deed in Los Altos for real estate investors. The investors needed the $350,000 for development costs on a new investment property they were building in the East Bay.
The hard money second trust deed was relatively simple since the home was appraised for $3,200,000 and the balance on the first mortgage was just under $1,000,000 (31% Loan-To-Value (LTV)). Our new loan for $350,000 would take the Combined Loan-to-Value (CLTV) up to 42%.
Trust deed investors who lend on second mortgages are usually pretty comfortable with <50% CLTV loans. They also like a ratio between the first mortgage and second mortgage balances of approximately 3:1, which in this case was $1,000,000 : $350,000. A general rule of thumb for our second trust deed lenders is that they usually will tolerate a ratio of 5:1 between first and second mortgage balances.
Hard Money Second Trust Deed Terms:
- $350,000 Loan Amount
- 8.99% Interest-Only
- $2,622/Month Payment
- 60-Month Term
- 12-Month Prepayment Penalty Period