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Second mortgages are sometines required by borrowers when they require additional funds that their existing lender is unwilling to provide. Alternatively there are times when the existing mortgage is secured at a competative rate and the borrwer needs additional funds for business purposes and a second mortgage is a cheaper option than refinancing the entire facility.
A second mortgage is secured on real estate which has already been pledged as collateral for an earlier mortgage. The second mortgage carries rights which are subordinate to those of the first with priority in settlement of claims is given to the earlier mortgage.
Second motgages can be structured to assist investors to acquire existing properties for either investment purposes or where “value-add” opportunities are available.
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