Things to Consider When Taking a Commercial Real Estate Loan
The number of commercial real estate have transacted is about 48 billion square feet so it a lot of restaurants, office buildings and hotels. You can use a commercial real estate loan when you want to pay high cost of owning and maintaining property which is needed for your valuable business. People need to be financially smart and start building equity after getting the commercial real estate loan.
Deciding to boost your equity only makes it easy for one to repay their loan on time since they can make larger down payments. People are still confused on how they can access a commercial real estate loan and find one that is good for them. The commercial real estate loan is not a lien on residential property but on commercials one only. Your real estate property provides an income then you can get a commercial real estate loan.
The Investor will have to lease spaces in the business property sale in can collect rent, but they only qualify for the loan if they occupy 51% of the building. Some individuals are not comfortable taking too much space in their properties, so they settle for an investment property loan. Lenders providing the commercial loans usually wants to understand the credit history of the borrower especially because the loan is secured when the property is bought.
Banks are usually looking to lend commercial loans to individuals that have a strong business, low debt service coverage ratio and excellent personal credit. The lenders want to ensure they are giving their money to someone trustworthy so they check collaterals, loan-to-value ratio and ask the borrower to offer tax returns and financial statements for the last 3 to 5 years. Any partnerships corporations, developments and real estate investment trust that wants to get a commercial property can get health and quickly receive a real estate loan.
The common type of residential loan people pick is the 30-year fixed mortgage, but a typical commercial loan can last from 5 to 20 years so talk to the lender and see which loan they can provide. The amortization period of a commercial mortgage loan is longer compared to a residential loan plus it might be written off. The interest rates of commercial mortgage loans are fixed so they will not change or variable which means the rates will change depending on the underlying indexes but that are down payments will be anything from 10-50%. Getting commercial loans traditionally will depend on the lender and borrower since banks offer an amortized loan that lasts up to 25 years while others have an interest only loan that lasts 10 years.