Commercial
Real Estate Loans > Why
Most Commercial Lenders Forbid Second Mortgage Loans
Why
Most Commercial Lenders Forbid Second Mortgage Loans
Most Commercial Lenders
Will Not Allow the Seller to Carry Back a Second Mortgage
Suppose your client
is trying to buy a commercial property with a down payment of just 10%.
His plan is to have the seller carry back a second mortgage on the commercial
property equal to 15% of the purchase price. He will then try to get
a loan from a commercial bank for 75% of the purchase price.
Unfortunately
the plan will not work. Most banks and all CMBS lenders forbid second
mortgages on the property at the time of the purchase. (Many CMBS lenders
WILL allow a mezzanine loan, however.)
So why are second mortgages
forbidden on the sale of commercial properties. The reason is because
commercial lenders fear that the property owner, if cash gets tight,
will use the repair money to make the payments on the second mortgage
rather than to maintain the property.
A good solution is
to have the seller carry back the second mortgage on another property
owned by the buyer, say a rental duplex or a different office building.
When you apply for
a commercial mortgage loan using C-Loans, we have a special section called "Special
Issues" where you can describe the junior financing that you hope
the bank will alllow the seller to carry. C-Loans is a great way to quickly
present your deal to 30 lenders to find the one lender aggressive enough
to help your client.
Click here to search
the databank: C-Loans
Commercial Mortgage Lender Databank