The Equity Loan is very popular for borrowers who have equity in an existing investment property-we are one of the only lenders who will lend in a junior (often called a 2nd) position behind an existing loan.
Annualized 12% interest only on the entire loan amount, paid monthly. EX: $100,000 Loan Amount would cost $1,000.00 per month
A point is 1% of the total loan amount. Ex: $100,000 loan amount would incur a one time charge of $2,000. We call these point are our Loan Fee. Some lenders call these Origination Fee, but (outside of the interest mentioned above) this is this is the only fee where our company earns money.
3 Points-Second Position Loans Only
Junior position Equity Loans will incur an addition point (1% of loan amount). This fee is due to the increased risk, additional underwriting, and the need to monitor the first position loan status throughout the term of the loan.
- $0.00 Prepayment Penalty
You will not find any other fees in our business model.
This loan can be collateralized by 1-4 family residential investment property.
The Combined Loan to Value of any existing loans when added to a new loan would need to be below 70% of the current value of the property.
This loan can be collateralized by commercial property.
The Combined Loan to Value of any existing loans when added to a new loan would need to be below 60% of the current value of the property.
The Combined Loan to Value of any existing loans when added to a new loan would need to be below 50% of the current land value.
We can legally encumber a borrower’s residence if the use of funds is strictly for business purpose, but for the protection of our borrowers, it is honestly very rare that we will consider this loan.
Use of Funds
Loan proceeds may be used for improvements on an investment property.
Loan proceeds may be used for the purchase of a new investment property (for flip or rental).
Loan proceeds may be used for any verifiable business purpose.
Funds may NEVER be used for personal debt reduction or any other personal use. If this loan is not for the purchase of a new property, borrowers are required to present a hand written description of intended use of funds prior to approval and again at closing. There are no exceptions.
While we don’t have a minimum credit score (we understand this credit score only tells part of the picture, and we are always willing to look deeper), we generally want to see a credit score over 650, we only want to make safe loans (for ourselves and our borrowers). As a national average, borrowers with less than 650 credit score have a 27% default rate while borrowers over 740 credit score have a 5% default rate. We are willing to allow borrowers to have an additional guarantor when it is needed to meet our credit threshold.
We will originate an Equity Loan to an entity (LLC/Corporation), or a trust. We will need a copy of your entity documents prior to loan closing. All entity loans require personal guaranty.
While we always recommend a phone call first, you can fill out a borrower application here.
As Is Value
As-is-Value (ARV) is determined by comparable properties in close proximity to the subject property that have sold in the recent past. Hopefully you are very familiar with your “comps” and sharing those with us will again help in making a quick loan decision. We are happy to share what our research shows as well.
In the case of an income producing property, As is-Value is also determined by the current cap rate, or the amount of income compared to the ongoing expenses of the property. To assist us in determining this, we may need to see rent rolls, expenses and/or Lease Agreements.
You may find a property application here.
All junior position loans require review of existing loan documentation, initial and ongoing proof of loan payment status, and typically an inter-creditor agreement with the other lender.
Note: we always recommend that borrowers pursue conventional financing in order to access property equity, but certainly understand time constraints, and hey, the best deals in Real Estate move quickly…that’s why we are here!