A homebuyer with insufficient financing to purchase a property might need to get a second form of funds from a bank, private lender, or individual. A second trust deed can help secure a second form of financing on the property.
Keep reading to know what a second trust deed is and when to get one.
What Is a Second Deed of Trust?
A second trust deed loan, often called junior loans or subordinated loans, allows property owners to use their property as collateral for the loan. Second trust deed loans mean that there is likely already a loan or lien on the property, called the first deed of trust.
Second trust deed loans are a high risk for the lender and the borrower because if the borrower stops making payments on the original lender, the first lender can foreclose the property, knocking out all other loans, which means that the second lender loses their money.
Who Provides Second Trust Deed Loans?
Banks, credit unions, and hard money lenders are the most common providers of second trust deed loans. Private money lenders can provide short-term loans that fund your property very quickly.
Most private loan companies provide for primary residences, while some private loan companies provide solely for business property.
Most junior loans are fixed between $250,000 to $1,000,000.
When Should a Second Deed of Trust Be Used?
Some states like New York, Vermont, and Ohio are “mortgage states” that do not use deeds of trust. However, in other states like California, Georgia, and Hawaii, it is required to use a deed of trust by state law whenever the buyer borrows money to finance the purchase of a property.
A lender should use the second deed of trust to legally bypass time-consuming and costly foreclosure processes if the borrower stops paying their loan payments.
However, if you’re a borrower and need help financing your property, you should get a second trust deed and contact a financial advisor to help you budget your payments.
Val-Chris Investments is here for you if you require a second trust deed for your real estate property. Our trust deed investors offer personalized funding solutions through due diligence, transparency, and integrity. With Val-Chris Investments, you can accomplish your financial endeavors.