California Private Money Financing

Cash-Out Second Trust Deed Loans in California: Keep Your First Mortgage

Business purpose cash-out 2nds for small business owners and real estate investors, including on owner-occupied properties, arranged by Hanover Mortgage Company throughout California.

Updated October 7, 2026  |  7 min read

You have equity in your property and a business need for capital, and the first mortgage you already have is worth keeping. A cash-out second trust deed is designed for exactly that. Hanover Mortgage Company has arranged second trust deeds across California, including a $500,000 2nd TD on a Costa Mesa auto showroom, a $325,000 2nd TD on a Tiburon rental, and a $205,000 owner-occupied business purpose 2nd TD in Palos Verdes Estates.

What is a second trust deed?

A second trust deed (2nd TD) is a loan secured by real estate that already has a first mortgage. It sits behind the first in lien position, and you make payments on both loans. Hanover Mortgage Company is a private money mortgage company: we arrange the financing, private trust deed investors provide the capital, and HanoverMC underwrites each loan and orders custom California loan documents.

Cash-out refinance or cash-out second?

Compare the total cost of carrying both loans with the cost of a new cash-out first. The right answer depends on your numbers.

Who uses cash-out second trust deeds?

Small business owners turn equity in a building, a rental, or the home they live in into business capital. Real estate investors fund their next property or renovations while keeping existing financing on their rentals. Common business purposes include:

?  Working capital, payroll, inventory, or equipment

?  Business expansion or a partner buyout

?  Paying off business debt, business taxes, or an existing 2nd

?  Down payments, renovations, or gap funding on investment properties

Owner-occupied business purpose 2nds: yes, HanoverMC arranges them

Not every private money company arranges loans on owner-occupied property. Hanover Mortgage Company does, as long as the loan is for a legitimate business purpose. Loans for personal, family, or household purposes, such as paying off personal credit cards, remodeling your own home, tuition, or vacations, are not eligible.

You will sign a business purpose statement and describe how the funds will be used, with supporting details about the business or investment properties they go to.

A real example: the owners of a high-equity home in Palos Verdes Estates needed capital for their business. Instead of refinancing, they kept their first mortgage in place, and HanoverMC arranged a $205,000 business purpose second trust deed at 29% CLTV on a 36-month term. The borrowers used most of the proceeds to pay off business debt. Because the home is owner-occupied, the loan qualified only because the funds went to the business.

When a cash-out 2nd is not the right move

A second trust deed is not for every situation. It is usually not a fit if:

?  You don't have a plan to pay off the balloon by selling, refinancing, or using business proceeds before the term ends

?  The combined loans would go over about 65% of the property's appraised value

?  The money is for personal, family, or household use

?  Payments on both loans would strain your cash flow

If any of these apply, we will tell you upfront.

How much can you borrow?

The key number is combined loan-to-value (CLTV): all loans on the property divided by its value, based on a formal appraisal.

Hanover Mortgage Company generally considers arranging financing up to 70% LTV on 1–4 unit properties and up to 65% LTV on commercial properties. When there is more than one loan on the property, CLTV is generally capped around 65%. Land is evaluated case by case. All figures are guidelines, not commitments.

Eligible properties: single-family rentals, 2–4 units, 5+ unit apartments, retail and commercial, industrial, auto-related, mixed-use, office, land (case by case), and owner-occupied homes for a business purpose. The property must be in California.

Typical loan terms

Past closed transactions

By the numbers: the three 2nd TDs in this article ranged from $205,000 to $500,000, closed between 29% and 52% CLTV, and carried terms from 24 months to 5 years, on an owner-occupied home, a rental, and a commercial auto showroom.

Past transactions are shown for illustration only. They do not indicate that a future loan will be approved or offered on similar terms.

When you call, have your property address and estimated value, your first mortgage statement, and how much you need and what it is for. Timing depends on the appraisal, title, and how quickly documents come in. If you have a deadline, tell us upfront.

Frequently asked questions

Q: Should I do a cash-out refinance or a second trust deed?

A: If your first mortgage has terms you want to keep, a cash-out second lets you access equity without replacing it. If your first no longer fits your plans, a cash-out refinance may make more sense. Compare the total cost of both options.

Q: How much cash can I take out with a second trust deed?

A: It depends on the appraised value and your first mortgage balance. With CLTV generally capped around 65%, a property appraised at $1,000,000 with a $500,000 first could support a second of up to about $150,000, subject to underwriting.

Q: Can I get a second trust deed on a property I live in?

A: Yes. Hanover Mortgage Company arranges owner-occupied second trust deeds as long as the loan is for a business purpose. Loans for personal, family, or household purposes are not eligible.

Q: How do I show my loan is for a business purpose?

A: You sign a business purpose statement and describe how the funds will be used, with supporting details about the business or investment properties the money goes to.

Q: Are there upfront fees or prepayment penalties?

A: HanoverMC charges no fees before closing and has no prepayment penalties. Mortgage broker fees and customary closing costs apply at closing.

Q: Does my credit score matter?

A: Credit is reviewed, but the property, its equity, and the business purpose of the loan carry the most weight.

Q: What happens when the balloon payment comes due?

A: The remaining balance is due at the end of the term. Borrowers typically pay it off by selling, refinancing, or using business proceeds, so plan your exit before you close.

Q: Where does Hanover Mortgage Company arrange second trust deeds?

A: Throughout California, including Orange, Los Angeles, San Diego, Riverside, San Bernardino, Ventura, and Marin counties, the Bay Area, and Sacramento. California properties only.

Hanover Mortgage Company arranges private, business-purpose mortgage financing for property owners and investors throughout California, evaluated primarily on the asset and available equity rather than income or DTI. HanoverMC does not fund loans directly — capital comes from private trust deed investors, with financing arranged under Hanover Mortgage Company's California DRE broker license.

HanoverMC is a mortgage broker and arranges loans; it is not a lender. Business purpose loans only; not available for personal, family, or household purposes. Loan programs, amounts, and terms are subject to change without notice. All loans are subject to underwriting and approval. This article is general information, not legal or tax advice.