Can You get a Second Mortgage on a Commercial Loan?

A few days ago we talked about the differences between a commercial mortgage and a residential mortgage. And while the two certainly do have their differences, that post also outlined some of their similarities. One of those similarities, that was not covered in the earlier post, was that second mortgage loans can be obtained on both. But there are still some differences between a second mortgage on a residential loan and one on a commercial mortgage. And the reasons a homeowner wants a second mortgage are probably going to be different than the reasons of a business owner also.
The biggest difference with a commercial second mortgage lies in both the need of the business owner, as well as when the second mortgage is applied for. Generally when homeowners take out second mortgage loans, they do so because they have unforeseen medical expenses, home renos, college tuition, or some other need that suddenly arises requiring some extra cash. Because of this, a homeowner may apply for a second mortgage on their property a year, three years, or even five years after they obtained their first mortgage.
However, second mortgage loans on commercial properties are usually obtained at the same time as the first mortgage on the property; and this is because commercial second mortgages are usually obtained in order to help finance the first mortgage. First commercial mortgages generally only apply to about 70% of the property’s sale price. For those who only have a 20%, or less, down payment, there’s still at least 10% that needs to be paid on the property. A commercial second mortgage in this case, can lower the LTV (loan-to-value) ratio of the first mortgage, thereby enabling the business owner to be eligible for that first mortgage, in a situation where they may not otherwise be.
By lowering the LTV, a commercial second mortgage will also allow the business owner to finance the remaining balance at a later date, or eventually consolidate both the first and second mortgages into one single loan. Either way, the business owner still gets the title to the property and can start making profits that will eventually help pay for both the first and second mortgages on the commercial property.