Frequently Asked questions
1. What is a First Position Commercial Mortgage?
A First Position Commercial Mortgage is a private third-party loan to Accelerated Equity that is secured by commercial real estate. Private lenders select a commercial mortgage in Accelerated Equity's inventory to serve as collateral for their private loan. They are recorded on title and acquire a first lien position on the mortgage, and Accerated Equity pays each client immediate monthly interest payments at a fixed annual yield, with a return of principal at the end of the term.
2. Why are they called First Position Commercial Mortgages?
The phrase “First Position Commercial Mortgage” describes the collateral pledged by Accelerated Equity as security for the loan you are making. As our client, you select a particular commercial mortgage from Accelerated Equity's inventory to serve as collateral. A First Position Commercial Mortgage loan is not a mortgage investment pool and it is not a direct investment in real estate. They may also be referred to as First Trust Deed Loans or Senior Interest Position Mortgages.
3. What is a first position in a commercial mortgage?
As a commercial mortgage lender, Accelerated Equity executes only first mortgage transactions with commercial borrowers ensuring we hold the first lien on the property. If you have a first position, that means you have priority over any other liens or claims on a property if the property owner defaults.
4. With interest rates so low, why do borrowers come to Accelerated Equity?
Unfortunately, banks are not lending the way they used to. In today’s lending environment, real estate developers and commercial borrowers are seeking out alternative financing that they can receive in 2 to 3 weeks, which Accelerated Equity provides. We offer short-term bridge loans to commercial property owners based on the value of their property. The borrowers qualify for our mortgages because they are secured by the high value commercial assets.
5. What types of property are used as collateral in these transactions?
Generally, Accelerated Equity secures these mortgages with commercial real estate, such as multi-unit apartments, office buildings, retail centers and; though we will sometimes accept as collateral non-owner occupied, single-family homes that are held as investment properties and owned by a corporation or limited liability company.
6. What are some of the terms of the mortgage given to the borrower?
Our commercial mortgage lending policies dictate that we lend for a maximum loan term of 6 to 9 months and up to only 70% of the value of the real estate. That means the properties that secure the mortgages are worth considerably more than the loans themselves at closing.
7. What type of due diligence does Accelerated Equity perform on these properties?
Accelerated Equity performs a title search to make sure we have an insured first lien position and thoroughly evaluates each property by conducting a comprehensive CMA to confirm market value.
8. Are the properties insured?
Accelerated Equity obtains insurance coverage on the encumbered property. This mitigates the risk of loss to the property’s value due to damage, destruction, natural disasters (earthquake, flood, tornado, hurricane, mudslide), and the like.
9. What is a lender’s collateral?
With loan-to-value ratios of 70% or less, the property’s equity is your collateral.
10. What is the paperwork required to get started?
When you lend on a First Position Commercial Mortgage, you enter into a Promissory Note and Loan Agreement that set the terms under which Accelerated Equity repays you.
11. How does Accelerated Equity establish that the property has no additional liens?
Accelerated Equity pays off any existing lienholders when it enters into a transaction with a borrower so there are no additional liens on the property. Additionally, Accelerated Equity obtains a title policy for each property.
12. How do I verify that I hold a first lien position in the mortgage?
Upon request, Accelerated Equity will provide you with a copy of the title policy which indicates there are no other liens or claims above you.
13. Does the borrower make payments to me?
No. Accelerated Equity is contractually obligated to make your monthly interest payments and, regardless of the status of the underlying loan.
14. What happens if the borrower does not make payments or defaults?
First Position Commercial Mortgage loans are private transactions that are separate and distinct from the pledged collateral. As such, Accelerated Equity's obligations to you are neither contingent upon nor subject to the performance or repayment status of the underlying commercial mortgage. If a commercial borrower does not make its payments to Accelerated Equity or defaults, Accelerated Equity remains obligated and shall continue to pay your monthly interest payments and return your principal at the end of the term according to the terms of your Promissory Note and Loan Agreement.
15. How am I taxed on a First Position Commercial Mortgage?
You should consult a tax adviser or accountant for tax-related questions specific to your situation; however, the IRS typically taxes payments on first lien position interest holdings as ordinary income. Accelerated Equity will provide a Form 1099 for all lenders.
16. How do I get started?
If you’d like to get started on purchasing one of our available First Position Commercial Mortgages: