5 Best Examples of Owner-Occupied Hard Money Second Mortgages

If you’re a real estate investor or business owner seeking fast financing using your primary residence as collateral, this article covering the five best examples of owner-occupied hard money second mortgages should give you a good idea of what you can expect when pursuing this type of financing.

Seasoned investors and business owners will use a primary residence or owner-occupied property as collateral to secure a hard money second mortgage when they face a temporary cash crunch due to delays selling a property — or, when a great opportunity pops up and they want to move quickly to close the deal. 

Sure, hard money second mortgages are more expensive than bank loans. But they provide speed and certainty of closing, whereas the bank process can take 45-90 days — especially for real estate investors and self-employed borrowers whose income and tax strategies often maximize tax deductions while minimizing taxable income. If you've been through this process with a bank, then you know how long it can take.

In contrast, owner-occupied hard money second mortgages, while more expensive, offer investors a significant equity position in their home and a chance to access funds within a brief, 10-14 day window.

Below are five examples of owner-occupied hard money second mortgages that my company, First Capital Trust Deeds (FCTD) originated for real estate investors and business owners.

$2 Million Owner-Occupied Second Mortgage in the Bay Area

A high-end Bay Area home builder had the opportunity to acquire a 2.5-acre property that could be subdivided into eight lots with homes that would sell from $2.5 to $3.5 million. To get their $1.5 million offer accepted, they wrote a full-price offer which closed in 15 days. The funds to complete the acquisition came from a $2 million hard money second mortgage secured by the builder’s owner-occupied primary residence. The extra cash-out proceeds funded the entitlements and a portion of the new subdivision's infrastructure costs.

The 24-month term gave the homeowner time to complete the entitlements, build the street, and obtain a construction loan to build eight houses, which paid off the owner-occupied second mortgage.

$1.4 Million Owner-Occupied Second Mortgage in Newport Coast

FCTD provided an owner-occupied hard money second mortgage for an investor who used their approximately $9 million home in Newport Coast as collateral for the $1.4 million second trust deed. Like many homeowners, this investor locked in a 30-year fixed-rate loan in the sub-3.00% range and won’t be touching that loan for many years, if ever.

Proceeds from the loan were used as down payment funds for the acquisition of a fix-and-flip property in Newport Beach, for which FCTD provided the bridge loan financing as well.

$1 Million Owner-Occupied Hard Money Second Mortgage in Los Angeles

A real estate industry professional used their primary residence in Los Angeles as collateral for a hard money second mortgage, with proceeds from the cash-out junior lien going to pre-development costs on their next project. The $1 million second mortgage at 62% combined loan-to-value (CLTV) behind a jumbo first mortgage was written for 12 months at 12.00% interest-only.

$5 Million Owner-Occupied Second Mortgage in Silicon Valley

A Bay Area real estate investor, with an ultra-low interest rate on their first mortgage, used a $5 million hard money second mortgage with a five-year term to acquire a waterfront property on Lake Tahoe where the seller was carrying a $3 million mortgage.

The borrower pursued hard money after being turned down for bank financing after six weeks due to fluctuating income the previous two years from acquiring and selling properties. Capital gains one year, negative income from paper losses the next year.

The Lake Tahoe property had a strong rental history that more than covered the cost of servicing the debt on the hard money second mortgage.

$450,000 Owner-Occupied 2nd Mortgage in Malibu

A Los Angeles-based caterer was expanding into a new location. They used the significant equity in their Malibu primary residence as collateral for a $450,000 hard money second mortgage. The 24-month loan closed in 21 days after the appraisal was completed. The borrowers refinanced out of the loan into a new first mortgage, combining their existing first and the hard money second mortgage into one new mortgage.

Obtaining an Owner-Occupied Hard Money Second Mortgage

These five best examples of owner-occupied hard money second mortgages are a good sampling of the types of junior liens FCTD originates for real estate investors and business owners. Most of our hard money second mortgages are in California, where we have two offices – Newport Beach and Orinda. FCTD also originates business purpose owner-occupied second mortgages in Oregon, Idaho, Utah, Montana, Arizona, and Florida.