We want this experience to be as fast and as simple as possible, so we can fund you ASAP. As we do this every day, we thought we should share some tips with you, and highlight the common mistakes that get made. Please take a moment to watch as there is sure to be something in this short video that will be of assistance to you.
It’s our aim to help as many small and medium-sized businesses as possible, and we have been successfully doing just that for years, so let me assure you, you’ve come to the right place.
Now, whilst Ive got you, there are a couple of important things you need to know. Firstly, we are all about speed, honesty and transparency, and one of my fantastic team members will be in touch with you very soon, during business hours, to have a quick, No Obligation chat with you to discuss your application. It should take no more than a few minutes.
Secondly, we ask that you DON’T apply with any other lenders until we can chat with you. Now I don’t say this so we can do a hard sell on you. No, it’s simply because… unlike us, most other lenders will automatically do a credit check on you as soon as you apply.
Sadly, the more hits on your credit file, the lower it will make your credit score. So, hold tight for one of the friendly Homesec team members to call. If we can help, we will.
If for some reason we can’t, we will go the extra mile and point you in the right direction.
Has your loan application been declined? Have you made an entire business plan around this short-term mortgage, and the answer is, “Sorry, not this time!” Do not worry; sit back and relax. You are not alone in this situation, and many applicants face rejection of loan applications. If your application is rejected, keep pursuing your goals. Figure out the problem before applying for alternative funding.
The first step is to find out why this application was unsuccessful. Unfortunately, the lender rejected your loan application, but it is important to look into the details and make sure your assumptions are correct. That way, whenever that happens, your next application may have a better chance of success. Applying for a loan too often can result in all applications getting rejected and hurting your credit score.
Here are some reasons why lenders decline 1st mortgage or business loan applications:
Bad credit will adversely affect your application for a business loan. The lending institute will immediately decline the loan application. A credit score is a number that you must maintain to avail of business loans at low-interest rates. Checking your credit score and obtaining a credit report is mandatory for traditional lending options, however private lenders do not have this criteria.
In addition to the loan application, the applicant must submit loan documents specified by the lender. You must submit all requested documents with the necessary details to complete your application. You should not submit incomplete, lost, false, forged, or counterfeit documents to any financial institution. It can lead to rejection.
Every borrower should be aware of the type of business loan for which they are applying. To be successful, you should prepare a specific, self-designed business plan and present it properly during your loan application. Traditional Banks hesitate to lend to business owners and entrepreneurs without a business plan and adequate business information. Whilst banks have this criteria again private lenders have much less requirements.
A company’s cash flow is the primary source of information lenders use to assess the ability to repay the loan. Insufficient cash flow can cause banks to lose confidence in you, leading to 2nd mortgage loan declines. Maintain proper cash flow by arranging bills and eliminating extra charges.
Second, not all banks offer unsecured loans. For startups, business owners, and corporations wishing to apply for secured business loans or secured loans, it is mandatory to provide sufficient collateral required to get the loan amount. Again, insufficient collateral by the applicant will result in the refusal of the loan. You can submit collateral, including residential or commercial real estate.
A “New Credit” is a customer with no current or previous credit use and does not have or maintain a credit score. These clients who want to start their businesses need help getting loan approvals or having a loan declined, as banks classify them as high-risk applicants. Therefore, a “credit newbie” or startup applicant who is not very familiar with the banking industry should first start using basic credit products such as credit cards. When using a credit card, the Customer should not maintain a high credit utilization rate above 30% of the total approved limit. After building a satisfactory credit score, a traditional bank may then look at an application, however private lenders are also an alternative for a short-term mortgage.
After identifying the reason for rejecting the 1st mortgage application, check your credit report. Report copies are available free of charge from all three credit bureaus. Negative grades can affect your creditworthiness. When reviewing your credit report, ensure each account listed is yours and is accurate.
You can appeal any inaccuracies in your credit report to one of the three credit bureaus. You can pay any credit repair company to pinpoint the bad points or do it yourself. You are free to object to any incomplete or inaccurate information.
In addition to removing errors and negative comments from your credit report, a borrower should consider improving the following key factors to improve your loan application.
Poor credit may result in the rejection of your 2nd mortgage application. Traditional lenders use this score to assess their risk as borrowers. Different lenders consider varied scores to be good, average, or bad. To know the perfect credit scores, you must see the eligibility criteria of respective lenders. Some tips to improve credit score are paying back on time, limiting the use of credit cards, and paying all the utility bills timely.
Lenders can also reject 1st mortgage applications if the DTI ratio is too high. Look at this number to gauge your ability to repay your new loan while managing your current debt. Lenders generally prefer a ratio of 36% or less. However, in some cases, they may consider applications with up to a percentage of 50%.
To calculate your DTI, the lender divides the current monthly debt burden by your monthly income. For example, if your current monthly debt is $3,000, your gross income is $4,000, and your DTI ratio is 75% ($3,000 / $4,000).
Increasing your income is easier than doing it, but it can help you earn more credibility. The higher your income, the lower your DTI ratio may be. You will likely meet the lender’s minimum DTI requirements. To increase your income, consider starting a lucrative side business or mastering a popular skill to increase your earning potential.
Feel free to ask the lender to explain why they have declined the short-term mortgage application. Before applying for another loan, double-check your credit report to ensure everything runs smoothly. See if your credit score has improved. To increase your chances of approval, you should wait until you meet the lender’s requirements or choose another lender better suited to your financial situation. Always remember that although traditional lenders have arduous criteria to meet private lenders have a much more relaxed approach to business lending.
Do you have financial problems such as overdue taxes, unpaid business debt, or other business related debt that needs consolidation? You can solve most of these issues by securing a loan. It is often difficult for borrowers to meet the eligibility requirements of traditional lending institutions like banks. There can be many reasons for this, like affordability, credit issues, or the purpose of the loan.
There are different types of loans available in the New Zealand financial market. Each type of loan is suitable for different situations and needs. What are the right circumstances for a 2nd mortgage loan, and why should you apply? Let’s find out!
A second mortgage is a subordinated mortgage acquired while the original first mortgage is still outstanding. In case of default, the original mortgage will receive all proceeds from the liquidation of the property until fully repaid, and the second mortgage will be paid from the surplus.
For example, you buy a house for $400,000. You pay a 20% deposit payment of $80,000 and borrow $320,000. You decrease the balance to $250,000 over time. Now, you apply for a second mortgage. The new estimates put the house value at $525,000.Your home equity is your home’s current market value minus your debt, in this case, $275,000.
So how much home equity can you leverage? Often 75%, is the maximum lenders will advance to. Assuming you borrow 75% of your equity, you can get a loan using this equity of approximately $118,750. Once the loan is approved, the lender will register a mortgage on your property. This second mortgage has different repayment structure than your current first mortgage loan.
What does it mean to take a second mortgage? When most people buy a home or property, they take out a mortgage from a lending institution with the property as security. This loan is called a mortgage or, more specifically, a first mortgage. Borrowers must repay the loan in monthly installments of the principal and a portion of the interest. Over time, the home’s value will increase as homeowners make their monthly payments appropriately.
The difference between the current market value of the home and the remaining mortgage payment is called Home Equity. Homeowners may borrow against their home equity to fund other projects and expenses. The loan they are taking on the house is the second mortgage, as they already have the first mortgage outstanding. The second mortgage is a lump sum paid to the borrower at the loan term starting.
Like the first mortgage, the second mortgage must be repaid over a period at a fixed or variable interest rate based on the loan agreement with the lender. The borrower has to pay this loan off before getting another loan.
There are many ways people can use these loans. Some of these are:
If your business has unexpectedly experienced cash flow issues, getting a 2nd mortgage loan is the key to assist your business to continue trading. You can use the funds for any business issue experienced by a temporary cash flow issue.
You can achieve significant cost savings by using equity available in properties as security for commercial properties. Equity in any available property can be used to assist with renovations or even a purchase of a new commercial property. You can use these loans as the best bridging loan also.
Taking out a second mortgage as a fast business loan is quite common. It is much quicker and easier than preparing your company’s finances individually. Some lenders will not assist with start up businesses without having any security to offer. A second mortgage can help you set up a new business quickly and easily by using the available equity.
You can also use a second mortgage to assist with the deposit payment on any commercial investment property. New Zealand mortgages are subject to regulations and lending standards to protect the economy’s long-term health. It means you must save at least 20% down payment to qualify for a mortgage. Also, if you can find a lender who will lend you up to 90%, you will likely face much higher interest rates.
But you find a commercial investment and only have 10% of the deposit payment. A second mortgage to cover the shortfall could be the solution. It allows you to qualify for a traditional for 80% of the mortgage and save you the excessive fees, insurance premiums, and interest rates that come with a 90% mortgage.
You can apply for a second mortgage due to the following reasons.
A second mortgage is a popular financial product because it often allows you to access more funds than an unsecured loan. Some lenders let you borrow up to 75% of the value of your home, less your current first mortgage debt. With a home equity credit facility, you have the funds when needed.
Another reason to take out a second mortgage is that these loans often have lower interest rates than other loans and credit cards. Because the house secures the mortgage, the interest rate is lesser than credit cards and many other fast business loans.
A second mortgage can provide funding for any worthwhile business purpose such as cash flow, stock purchase or pay any unexpected expense. Many people consider getting a 2nd mortgage loan because of its usage flexibility. Consider how you will spend the money you borrow. It is best to invest that money in something that will improve your net worth in the future. A plan will help you repay the loans within an adequate time frame.
A short-term mortgage loan is a type of funding alternative that is beneficial to overcome a temporary business cash flow shortage, they can be used for any business related purpose. It is a type of loan where you have to pay back the entire amount with interest by a given date, normally terms are 1 – 6 months. It is advantageous for start-up businesses and business owners who may not be eligible to obtain loans from a bank. It can effectively solve temporary and sudden cash flow issues.
But what is the importance of this loan type? Well, there are many reasons why people are opting for this funding option. The reasons are as follows:
Short-term mortgage loans have different types, some of which are as follows.
Taking a short term loan with a fixed rate provides peace of mind that your repayments will not change for the term of the loan.
A short-term interest-only mortgage will enable you to pay the interest amount each month. The advantage of this is that the entire loan amount will not remain due until the end of the term. This funding can be easily worked into your cash flow.
In today’s uncertain economic world, securing a short-term mortgage is an option several business owners are taking advantage of. It has numerous advantages that people might be unaware of. These include the following:
Loan terms for the short term mortgage loans are flexible and are designed to suit your needs. You can take a loan for as little as one month or structure the loan up to a 12 month term. The lenders meet your needs and ensure that you are taking a loan term that suits your business and exit strategy.
Small business owners take up short term mortgage loans as they are designed for business use and as there are no repayments in some circumstances this is beneficial to businesses who have lumpy or seasonal cashflow.
As the loans are only for a short period of time, there are savings in interest costs as the loans do not run for long terms such as 10 years. They are designed for a short term need and you require the ability to repay the loan in a short time frame.
You can get the loan for your business if you meet the specific criteria of the lenders. The lenders will verify whether you can pay back the money or not, and they will also consider your exit strategy before they approve the funding. This type of funding is designed to be hassle free and easy to obtain.
Short term funding is only for business use, the applicants must be running and operating a business, they are not designed for be used for any other purpose.
Though this funding option is not suitable for everyone, it can be a lifesaver for businesses who need access to funds quickly, have equity in real estate and have a solid exit strategy for how the loan is going to be repaid.
As a business owner you may have to make several crucial decisions whenever you wish to apply for a business loan. Many times, people go with what they know and take a loan without considering its pros and cons. They cannot determine whether the loan type will serve them better or not. As a business owner, you should remember that the loan term is just as crucial as the amount and the interest rate. Depending on the term required, you will find short and long-term mortgages. Though they both have similarities, you need to learn their distinct and beneficial characteristics.
If you research the market, you will notice that the interest rate of short-duration mortgages is higher than the long-term mortgages. Their structure is different from the long-term one as you need to repay the money quickly with a lump sum payment. Though the payment seems intimidating, a short-term loan is a viable option and offers several advantages.
Any loans secured by real estate that has a less than 1 year loan term period are known as short-term mortgages. As this loan type gets repaid within a shorter time, it requires a higher monthly payment. However the interest rate can be higher than other types of loans. Unlike other mortgages, this option enables the borrowers to obtain funds quickly and exit out of the loan in a short period of time.
As a borrower, you will be expected to make monthly payments to cover the principal amount with interest, however some short-term mortgages can have the interest capitalised and repaid at the expiry of the loan. The long term mortgages act the same as the short-term mortgages with monthly payments, however the term is much longer up to 10 years in some cases.
Though you can afford long-term mortgages, the shorter ones will save your capital in many ways. When second mortgage loan lenders determine the rate, they may charge interest at a monthly rate however the loan term can be as short as one month due to its short-term nature. As a result the rate may be higher but you can obtain funding very quickly without the hassles that are associated with long term mortgages.
Short-term mortgages have multiple benefits. So, while considering mortgage terms, potential business owners must consider their resources and requirements to set themselves up for success. The information below will help you determine why applying for a short-term mortgage is feasible for businesses.
A short-term mortgage may cost less in the long run because you are only paying interest on the months the loan is outstanding, although the interest costs may seem high at the start, if you were repaying the loan over a much longer term you would end up paying substantially more and your cash flow could be affected. When considering a short-term mortgage you must always weigh up the total cost involved and do a cost benefit analysis, if the loan is going to help your business make money then the interest rate is irrelevant.
You can determine where your finances will be after some years or in the coming years. In that case, a long-term loan can make managing cash flow difficult due to its payment period. You need to repay the money continuously regardless of your economic situation.
But this will not happen in short-period loans. It offers predictability as you are required to pay the sum within a few months. If your business is struggling or has cashflow issues you can capitalise the costs of the loan and pay the funds back in a lump sum when your term expires.
You can save a decent amount if you borrow a short-term mortgage. Since you do not have to pay the money with a higher interest rate for more years, you can have absolute peace of mind and concentrate on your business more. Hence, it is a beneficial option to earn more profits and save for the future.
If you are paying the principal loan amount quickly, you can create additional equity. You can expand your business, launch new products, consolidate debt, and many more if you borrow a short-term mortgage loan.
Getting a short-term loan and paying it off on time is a beneficial option for boosting credit scores quickly. As you do not have to pay higher interest amounts for several years, you can improve the credit rating to help you to grow your firm business and assist you in getting a loan in the future.
Unlike banks and other loan types, short-term mortgages require less processing time. As a result, you will obtain the money much quicker, in as little as 24 hours in some cases.
Many people think that short-term mortgages are not beneficial as they have to pay a higher monthly payment or higher interest rates, however as long as taking the loan is going to help you make money in your business then the answer is an easy one to make. If you have any doubt and cannot determine what type is best for you, it is advisable to speak to a financial advisor before applying for any.
152 Fanshawe St,
Auckland, 1010, New Zealand
09 888 6550
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HomeSec Business Finance Limited
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