A dentist in Downey owned a commercial property worth $750,000 and owed $230,000 on the first mortgage. She wanted a second trust deed loan for $100,000 on top of it. Add the two loans together and you get $330,000 against $750,000, a combined loan-to-value of 44%. That ratio does a lot of the work in a second trust deed deal, so it’s where this post starts.
How a second trust deed works
A second trust deed is a loan secured by the same property as your first mortgage and recorded behind it. If the property were ever sold to pay off debts, the first gets paid first and the second comes next. Your first mortgage stays where it is. Nothing about it gets replaced.
Second trust deed or refinance
Refinancing replaces your first mortgage. A second adds a loan behind it. Our program page frames the second as a way to use the equity in your property without refinancing the first position, and that’s the reason to choose one. If the first mortgage itself is the problem, you’re having a different conversation. We arrange refinances too.
Combined loan-to-value is the number to know
Add what you owe on the first to the new second, then divide by what the property is worth. That’s combined loan-to-value, and lower is better.
The Downey deal is the clean example. $330,000 against $750,000 is 44%. That’s a thick cushion.
Our investor page also walks through a scenario that looks different. A $35,000 second sits behind a $500,000 first, on a property worth about $850,000, and the owner plans to sell. By our math that’s about 63%. The page calls that kind of deal a little riskier than the dentist’s. Same lien position, a thinner cushion and a repayment plan that depends on a sale.
Every scenario is unique, so there’s no single ratio that works for every deal.
Business purpose
We arrange second and third trust deeds for business and non-consumer purposes. The Downey property was commercial. If your plan is personal, ask a loan officer which side of that line it falls on before you apply.
Our program page lists financing renovations and funding a new investment among the uses.
Third trust deeds
Few lenders handle third trust deeds, as our program page puts it, and we arrange them. The combined ratio only goes up with every lien stacked on a property, so the equity that’s left matters even more.
What to have ready
Know the property’s estimated value and what you owe on the first. Our online loan request asks for the estimated value, the loan amount, the purpose and the property type, and with the first mortgage balance in hand we can run the combined number. We can fund in as little as 5 days. Most loans take 10 to 14 days. There’s no obligation, no cost and no credit pull when you submit the request.
If what you need is cash to close on something while permanent financing gets arranged, that’s a bridge loan, which is a different tool.
Next step
The program details are on our 2nd and 3rd trust deed lending page, and our private money lending page shows where seconds fit alongside the other programs. Send the request with the value and the first mortgage balance and a loan officer will take it from there.
GW Private Capital, Inc. is licensed by the California Department of Real Estate #01988401. This article is general information and not a commitment to lend.
