Second mortgages to $500,000
for any business purpose
It’s tough to get money out of banks right now, even if you have a solid growth plan and plenty of equity in your house. Second-tier lenders are more flexible and open minded than banks, and may even be prepared to overlook poor credit for smaller loans.
What you need
Depending on the lender, you will need to provide different paperwork. Some lenders will only look at the equity in your property and not your business financials - but they will only lend to 75% LVR.
Other lenders may go to 90% LVR, but they will want to check on your ability to repay the loan, so will want to see your financial statements, balance sheet, business bank transactions, and possibly your position with the IRD.
options for capitalised interest - no repayments for the first six months
Yes you read that right!
Capitalising interest with no loan payments for six months means you can implement your growth plans or get through a quiet period without worrying about repayments. Here’s how it works:
you won’t make any loan repayments for the first six months
at the six-month anniversary of your loan drawdown, the interest that you would have paid for those first six months is added to your loan balance, along with any fees. Then you have a new loan, that you start paying interest and principle (or interest only) on.
why might you want to capitalise interest on a second mortgage business loan?
There are many valid reasons for taking a six-month breather from loan repayments, for example:
funding repairs and maintenance during a quiet period, so you can repay the loan in peak season (eg in tourism businesses)
to get a new business model up and running
opening a new branch or location for your business, to cover the up front costs before the new location is earning revenue
to buy another business
to cover the up front costs of business growth before the revenue comes in.
There are advantages and disadvantages to doing this; read more about interest capitalisation and how it works here.
FAQ’S
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A second mortgage is a loan secured by your property. It’s taken out in addition to your existing mortgage, which may be your bank or some other lender. It allows you to borrow against the equity you've built up in your property, while retaining your primary lender’s right to being repaid first if you default on your loan and your property has to be sold. Selling your property is always a last resort.
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This will vary by lender. Some will calculate how much you can borrow based on your ability to repay. Others will calculate how much you can borrow based on the loan-to-value ratio (combined between your primary lender and them).
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When your interest is capitalised, you don’t pay anything for the first three to six months of your loan. Fees and the interest that you would have paid over that first three to six months are added to your loan balance at the end of the capitalisation period, creating a new loan balance.
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Yes you might be able to, so long as you have incorporated your company as the borrower must be a business.
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Anyone else who is named on the title of the property will need to be on board with your borrowing, as they will need to sign paperwork. This includes trustees of any trust that owns the property. We always advise co-owners to get independent legal advice before signing any documents.