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Hard Money Second Trust Deed Loans in California: What Borrowers Need to Know

You have equity in your property. You need capital. But your first mortgage isn't going anywhere — and a bank won't touch a second.
That's exactly the situation that hard money second trust deed loans are designed to solve. At Hanover Mortgage Company, we've arranged closed second trust deed loans across California — from a $500,000 2nd TD on a commercial auto showroom in Costa Mesa to a $325,000 2nd TD on a single-family rental in Tiburon. In this article we're going to walk you through exactly how they work, who they're right for, and what to expect.
What Is a Hard Money Second Trust Deed?
A second trust deed (also called a second mortgage or 2nd TD) is a loan secured by real estate that already has an existing first mortgage on it. The "second" refers to its lien position — if you defaulted and the property were sold, the first lender gets paid first, and the second lender gets paid from whatever remains.
Because second lien position carries more risk for the lender, banks and conventional lenders almost rarely offer them on investment or non-owner-occupied properties. Hard money private lenders (benies), on the other hand, can and do — as long as the combined loan-to-value (CLTV) makes sense.
Why Would You Need a Second Trust Deed?
There are several common and legitimate reasons real estate investors and business owners seek out a hard money 2nd TD:

You need capital but don't want to disturb your first mortgage. Maybe you have a low-rate first mortgage and refinancing out of it would cost you significantly more. A second trust deed lets you access the equity in the property without touching your existing loan.
You're a fix-and-flip investor who needs additional funds mid-project. Your first mortgage covered the acquisition but renovation costs have grown. A second trust deed can fund the gap without requiring a full refinance.
You need working capital for your business. If you own investment or commercial real estate with equity, a second trust deed lets you pull cash out for business purposes — payroll, inventory, equipment, expansion — without requiring you to show traditional income documentation.
You're doing a partner buyout. Buying out a co-owner's interest in a property often requires fast access to capital that a first mortgage refinance can't deliver quickly enough. A second trust deed can bridge that gap.
You have a maturing loan or other pressing deadline. Whether it's a tax obligation, a legal settlement, or a maturing debt, a second trust deed can provide fast capital secured by your existing real estate equity.
How Does the Math Work? Understanding CLTV
The key metric in a hard money second trust deed is the Combined Loan-to-Value (CLTV) — the total of all outstanding loans on the property divided by the property's current market value. Here's a simple example:

Example Deal
Property Value:  $1,000,000
Existing 1st Mortgage Balance:  $500,000  (50% LTV)
Requested 2nd Trust Deed:  $150,000
Combined Loan Balance:  $650,000
Combined LTV (CLTV):  65%  ?  Workable deal

At 65% CLTV on a property with a clean first mortgage, this is a workable scenario for a hard money second trust deed. The exact CLTV limit will depend on the property type, location, and the strength of the deal overall — but the principle is the same: the more equity that remains after the second is funded, the stronger the deal.
What Property Types Qualify?
At Hanover Mortgage Company, we can arrange second trust deed loans on a wide range of California property types:
•    Single-family investment homes and rental properties
•    Duplexes, triplexes, and fourplexes
•    5+ unit apartment buildings and multifamily
•    Commercial properties — retail, auto-related, office, industrial
•    Mixed-use properties
•    Owner-occupied properties for legitimate business purposes

The property needs to be in California and must have meaningful equity after the second trust deed is funded. Properties with deferred maintenance or title complexity are evaluated case by case — don't assume yours won't work until you've talked to us.
Owner-Occupied Properties: The Business Purpose Rule
Hard money lenders can lend on owner-occupied properties, but only when the loan is for a legitimate business purpose — not for personal consumer use. This is an important legal distinction under California lending law.
Business purposes that qualify include: cash-out for working capital, partner buyouts in a business, refinancing business-related debt, and property improvements tied to a business operation. We've arranged business-purpose second trust deeds on owner-occupied properties in markets like Palos Verdes Estates and Orinda — situations where traditional lenders couldn't move fast enough or couldn't underwrite the scenario at all.
If you're unsure whether your use qualifies as a business purpose, the first step is a quick conversation. We can usually tell you within minutes.
Typical Loan Terms
Hard money second trust deed loans are short-to-mid-term instruments. Here's what to generally expect — though terms vary by deal and are subject to change:

General Term Guidelines
Loan Amounts:  Starting at $50,000 — no fixed ceiling on strong deals
Loan Terms:  12 months to 5 years depending on program and property
Amortization:  Interest only available
CLTV:  Generally up to 65% depending on property type and location
Upfront Fees:  None at Hanover MC — no fees before closing
Lite documentation:  experience and cash flow are weighed for underwriting
How Fast Can a 2nd Trust Deed Close?
Faster than most borrowers expect. With a complete package and a responsive borrower, Hanover MC can close second trust deed loans faster than conventional lenders. We fund from our Rockstar trust deed investors.  The key factors that affect timing:
•    How quickly we can verify the existing first mortgage details and current balance
•    A formal appraisal is required 
•    How cleanly the property's title comes back
•    How quickly you can provide requested documentation

If you're working against a deadline — a looming obligation, a partner who needs to be bought out, or a business deal with a hard close date — tell us upfront. We'll give you a straight answer about whether we can meet it.
Real Deals We've Closed
We don't just talk about second trust deed lending — we do it. Here are two examples directly from our recently closed transactions:

Deal 1: Tiburon, CA (Marin County) — Residential Rental
Loan Amount: $325,000  |  Position: 2nd Trust Deed  |  CLTV: 50%  |  Term: 5-Year Balloon  |  Amortization: Interest Only
A California Landlord needed fast liquidity against a high-value Marin County rental property without disturbing a well-structured first mortgage. We arranged the second trust deed quickly using asset-based underwriting, preserving the borrower's existing financing and closing on their timeline.

Deal 2: Costa Mesa, CA (Orange County) — Commercial Auto Showroom
Loan Amount: $500,000  |  Position: 2nd Trust Deed  |  LTV: 52.46%  |  Term: 24-Month Balloon  |  Amortization: Interest Only
A business owner with a fully renovated auto sales showroom on a high-traffic Costa Mesa boulevard needed capital for business expansion and paying of an existing 2nd trust deed — fast. A first mortgage refinance wasn't the right structure. We arranged the $500,000 second trust deed in second lien position, funded by property value alone, and closed the deal on the borrower's schedule.
What to Have Ready When You Call
You don't need a full application to get an initial read from us. For a quick preliminary conversation, just have:
•    The property address and your best estimate of current value
•    The current first mortgage balance and lender name (mortgage statement, note and deed of trust)
•    How much you need to borrow in second position
•    What the funds are for (business purpose)
•    A brief description of the property — type, condition, occupancy

From there, if it looks like a viable deal, we'll walk you through next steps including documentation requirements, appraisal, and estimated terms. Most borrowers get a preliminary answer the same day they call.
Questions to Ask Any Hard Money specialist Before You Sign
Not all private lending companies operate the same way. Before committing to a second trust deed loan with anyone, get clear answers to these:
•    Do you charge any upfront fees before the loan closes? (Hanover MC does not.)
•    What is your CLTV limit for this property type?
•    What is the exact loan term and is there a prepayment penalty?
•    Will you require a formal appraisal?
•    How many second trust deed loans have you actually closed in California?
•    Can you show me funded deals similar to mine?
The Bottom Line
Hard money second trust deed loans are one of the most powerful and underutilized tools in a California real estate investor's toolkit. When you have equity and a legitimate need for capital, you don't have to refinance your entire first mortgage, wait 60 to 90 days for a bank to say no, or walk away from the opportunity.
If your property has equity and your need for capital is real, we want to hear about it.

No upfront fees. No runaround. Just a straight answer.

Contact us today:
•    Phone: 714- 838-1474
•    Website: www.hanovermc.com 
Don't let slow financing cost you your next deal. Speed matters in California. Let's get you moving forward.