What Are First Position Commercial Mortgages?

Barry Kornfeld pic
Barry Kornfeld
Image: fftaxgroup.us

The co-founder of the First Financial Tax Group, financial advisor Barry M. Kornfeld provides alternative income and growth strategies for conservative clients. Over the course of his career, Barry Kornfeld has gained significant experience with first position commercial mortgages (FPCMs).

First position commercial mortgage (FPCM) notes are an appealing option for those seeking a lower risk, fixed-income vehicle. Offering a stable 6% return with monthly payments, these one-year bridge loans are secured by a commercial property, such as an apartment or office building, or other commercial real estate structure. Importantly, the real estate value at closing will be substantially more than the total FPCM loan value, creating high-value collateral value and security for the FPCM holder.

When a client utilizes an FPCM note, he or she becomes the senior lien holder for the property and has his or her name listed first on the title, hence, the term “first position.” Clients often purchase FPCMs using a variety of funding sources, including IRA’s, pensions, trusts, and 401Ks. Since these FPCMs have a low loan-to-value ratio, averaging between 30% and 65%, or even less, it means that the client has a more secure and safer alternative to generate the highly coveted monthly income that so many seek in today’s yield starved economy.

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