Second Mortgage

A cash-out refinance replaces your first mortgage. A second mortgage sits behind it. With a refinance you pay off the old first loan and take a new, larger one, so your whole balance moves to new terms. With a second lien your first mortgage stays exactly where it is, and you add a separate loan against the remaining equity. If you hold a first mortgage you want to keep, the second lets you pull equity without touching it. The trade-off is position: the second lender is paid after the first, so the loan is sized on combined debt. Run both options on your own numbers. See cash-out refinance on an investment property and lien position explained.

Loan amounts run $50K to $1M, up to 80% combined loan-to-value (CLTV), as a lump sum or a line of credit, subject to underwriting. CLTV counts every lien on the property, your first mortgage plus the new second. For example, a $400,000 property at 80% CLTV caps total debt at $320,000 ($400,000 x 80%). Less a $180,000 first mortgage, that leaves up to $140,000 for the second ($320,000 - $180,000). With a $290,000 first, only $30,000 is left ($320,000 - $290,000), which is under the $50K minimum, so the loan does not fit that file. Figures are illustrations, not a quote.

It depends on what your first mortgage says. Your first mortgage may restrict junior liens: the standard 1-4 Family Rider, which Fannie Mae requires on the one- to four-unit investment loans it buys and which some other lenders also use, bars one without the first lender's written permission. Read yours before you apply. Garn-St Germain's implementing rule limits its junior-lien protection to loans on a home the borrower occupies or will occupy (12 CFR 191.5(b)), so it does not cover a rental. Talk to your attorney if the clause applies. A second lien is also paid after the first. If you later refinance the first mortgage, the second-lien holder generally has to sign a resubordination agreement so the new first keeps its position.

Investors who own a rental with equity and a first mortgage worth keeping. The property is a 1 to 4 unit residential investment property worth at least $100,000, non-owner-occupied, and short-term rentals such as Airbnb and VRBO are eligible. You can borrow as an individual or through an entity such as an LLC, and there is no seasoning requirement. Typical uses are a down payment on the next deal, a renovation on a property you hold, or paying off debt on the investment. Funds have to go to a business purpose, and we will ask what the money is for. If a refinance would reset a first mortgage you like, a second lien leaves it alone. See BRRRR financing for one way investors recycle equity.

A 1.00 minimum debt service coverage (DSCR), a 660 minimum FICO, and combined loan-to-value across every lien under the 80% cap. We also check that the property is non-owner-occupied investment property, that the use of funds is business purpose, and the terms of your first mortgage, including any clause that limits a second lien. Rent from a short-term rental counts toward DSCR. We may use an automated valuation, and a full appraisal can still be required depending on the findings and the LTV. The rate is fixed, and the prepayment penalty is 0 to 5 years. Every loan is conditional on the borrower and the property, some files may be placed with partner lenders, and this is not a commitment to lend. Terms are subject to underwriting.

No. This program is business-purpose only, on non-owner-occupied investment property. It is not a consumer loan, and we do not offer it on the home you live in or a second home. Federal rules treat credit to buy, improve or maintain a rental you do not occupy as business purpose, as long as you do not expect to stay there more than 14 days in the coming year (12 CFR 1026.3, comment 3(a)-4). Other uses of the cash have to stand on their own business purpose. If you plan to use the property yourself, this is the wrong product.