Business Loan question – for a residentially secured loan, do I have to move my home loan over to new lender?
Saturday, June 26th, 2010 at
9:09 pm
I’m looking to take out a business loan against some property equity I have. I was told by a lender that I had to re-finance my home loan and go with them if I was to take out a business loan with them.
Am I able to keep my home loan where it is? I don’t want to move it across because of the exit fees, legals, etc.
Info about Australian lenders
Quick House Sale
Related articles:
- Taxes on home sold with existing non-secured loan question? If I purchased a home for example $200,000 with a non-secured loan (strictly based on paperwork and credit, but no lien on the house) and I sold the house...
- I have bad credit. Where can I apply for a secured business Loan? I looking to borrow against my home. Where can I go to apply for a secured start up business loan and what steps should I take with poor credit...
- How to Borrow Up to 300,000 British Pounds With a Secured Loan for a Business Start Up Is it possible to get Secured Loans for a Business Start Up – specifically one that will let you borrow up to 300,000 British pounds? Yes, it is. However,...
- if i get home loan secured in this taxable year, can i deduct interest payments made before loan secured? my parents helped my husband and i purchase a home this year. we have a loan agreement with them and have been making payments of principal and interest since...
- i have a loan secured on my house,will i have a problem changing to a new mortgage lender? my current discounted mortgage runs out in january 2008 and i have a loan secured on my property.i want to change my mortgage in january 2008,will i have a...
Tagged with: Exit Fees • Finance Loan • Loan Lender • Loan Question
Filed under: secured loan
If the new lender requires that as a condition of making a loan, then, yes, you have to refinance your home loan.
And, really, in any case, the answer is yes. Look at it this way. You have a home loan with “Lender A.” The security for that loan is your home.
Now you want to borrow money from “Lender B.” Lender B wants some sort of security for its loan. And Lender B is saying that, for whatever reason, it doesn’t see enough security in your business itself. It wants more security. It wants your home, so that if you default on your new business loan, Lender B can seize and sell something.
Right now, if you run in financial problems, Lender B couldn’t go after anything.
Now, if there’s enough equity in your home, Lender B could take a second position–provide you a second mortgage–on your home. For example, let’s say your home is worth $500,000. If your first mortgage were only $200,000, there’s enough equity for Lender B to place a lien of, let’s say, $150,000, as a second mortgage on your home. (Or otherwise secure your business loan with a $150,000 pledge.)
But lots of people don’t have that amount of equity. So, let’s say that while your home is worth $500,000, you have a $400,000 mortgage on it. That’s a lot less equity, and little or nothing would be left if Lender B foreclosed due to a default on your business loan.
Your options are to seek less money for a business loan or to look for another lender (maybe Lender A) for the business loan.
Hope that helps.