Using Second Mortgages as Additional Collateral for Construction Loans

Over the past several months, WAC has provided financing for multiple construction projects where second mortgages were a critical part of the overall collateral package. These included both a luxury residential spec home on an exclusive island in the Northeast and a commercial development in New England. In each case, the borrowers faced similar challenges when working with large private lenders.

The Challenge: Restrictions from Large Private Lenders

In both cases, the sponsors were unable to secure the full amount of upfront construction financing from large private lenders. These lenders were unwilling to accept additional encumbered real estate owned by the sponsors as collateral. Specifically, their internal lending charters prevented them from taking a second mortgage position on any property, even when those properties had low loan-to-value (LTV) ratios and significant available equity.

Both sponsors owned other real estate assets with small existing mortgages and substantial untapped equity. Despite this, they could not access the additional capital needed to proceed with their development projects due to these restrictive lending policies.

The Solution: Worth Avenue Capital’s Flexible Lending Approach

WAC stepped in and structured bridge loans for both borrowers by taking multiple second mortgages on properties they already owned. These properties had sufficient equity and low LTV ratios, making them viable as additional collateral. At the same time, we adhered to WAC’s strict loan underwriting guidelines, which include confirming realistic exit strategies for repayment.

By using this flexible approach, WAC provided the additional construction financing needed to complete both deals.

The Result: Construction Projects Moved Forward

Once WAC closed these loans, both sponsors were able to move forward with their respective construction projects without further delay. Our short-term bridge loans served as the missing piece of the financing packages that allowed both developments to proceed on time.

Why Second Mortgages Can Be the Missing Piece

Often, borrowers own other real estate assets with meaningful equity that cannot be leveraged through traditional lending channels. WAC understands how to utilize these assets creatively, helping borrowers secure the capital they need while still meeting prudent lending standards.

By incorporating second mortgages into the collateral structure, WAC provides financing solutions that are both flexible and secure, helping developers, investors, and business owners keep their projects on track.

Conclusion: Partner with Worth Avenue Capital

If your project has stalled due to insufficient construction financing or rigid lending policies, WAC can help. Our ability to structure short-term bridge loans using second mortgages as part of the collateral package ensures that borrowers can access the capital they need to complete their deals.

Contact Worth Avenue Capital to learn more about how our creative lending solutions can help you move your next project forward.