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Second Mortgages, Mezzanine Finance and Equity/Joint Venture Capital

Second Mortgages,

You have a great facility with a bank but you need more funds for home improvements or an investment or to finish a construction project BUT your present lender and others you have tried “won’t come to the party”.

Other companies will suggest a complete refinance, but here at Fuss Free Finance we may suggest a second mortgage loan – sometimes referred to as mezzanine property finance or funding when it relates solely to construction projects. This way you keep your low-rate first mortgage facility for the bulk of your borrowings and get the money you need by way of a second mortgage loan that sits behind your bank mortgage.

Mezzanine Funding

Property developers are always looking for more innovative ways of funding their projects, and one way is with mezzanine property finance. This is a form of subordinated debt behind that of senior debt in terms of ranking on any claim on property assets and ahead of equity. With this type of financing, debt is generally secured by a second mortgage, and a second ranked fixed and floating charge over the borrowing entity and its directors. In short, mezzanine debt fills the gap between the property developers’ equity and the amount of senior debt available. This specific type of loan is generally only provided when the project is ready to begin, and relevant risk mitigation is in place.

Equity/Joint Venture Capital

This is where the developer seeks partners to invest in the project. The advantages of joint venture financing for the developer is that the project risk is shared among the partnership – however, so are the profits. This is the most appropriate way of raising funds in the early stages of a proposed development, before approvals, etc.

At the early stages the risks and returns are at their greatest, and all joint parties to the joint venture financing realise that if the proposed development is approved and completed there will be substantial profits. They are also aware that if the project is not approved or completed, there may be losses incurred.

How can we help? Call us now on 1300 131 876 to discuss your loan or complete our enquiry form and we’ll call you back.

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