Self-employed real estate investors often use their primary residence as collateral for second or third mortgages when they need additional cash to acquire or renovate an investment property. That was the case with this private money third mortgage in Los Angeles that First Capital Trust Deeds recently closed.
The borrower had recently acquired a fix and flip property that needed extensive renovations. Therefore, they used a portion of the nearly $500,000 in equity against their primary residence to finance the completion of the flip.
For the trust deed investor (lender) making the loan, the low balance and interest rates on the first and second mortgages were attractive in order to go in third position. The Combined Loan-To-Value (CLTV) was only 52%. With private money junior liens, whether in second, third, or fourth position, lenders like to be at 65% CLTV or lower.
Private Money Third Mortgage Terms:
- $150,000 Loan Amount
- 9.25% Interest-Only
- 240-Month Term
- 12-Month Prepayment Penalty