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. Being smart is important after checking out the commercial real estate loan since you learn how to build a lot of equity.
If you build equity then it will be easy to make large amounts for down payment, but you can decide to pay down your principal quickly. Take time to identify where you can access commercial real estate loans and identify which one best fits your needs and current situation. 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 commercial real estate loan lenders require the borrowers to lease out the property but still occupy 51% of the building, so they still have an opportunity to collect rent. You can choose an investment property loan is occupying too much space in the business will only be costly, or you don’t have used for the space. A commercial loan will be secured through property being purchased, but the lenders will scrutinize your credit history.
There is high chances of getting commercial loans from banks when you have low depth good personal credit and a successful business. Lenders will need the borrower to provide collateral, personal trustworthiness and loan-to-value ratio and be prepared to provide your financial statements and tax returns for about 3 to 5 years. If you form an entity like partnerships, developments and corporations with the sole purpose of on in commercial real estate then it will be easy to get 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 commercial loans are regularly amortized and eventually written off plus the amortization period is more than the loan period. Although residential mortgage down payments are 20% it is slightly higher for commercial loans like 10-50%, and it has fixed interest rates, but sometimes it won’t fluctuate depending on the underlying indexes. If you are getting a loan from the bank then you should identify whether they are offering wholly amortized loans with terms up to 25 years while others offer interest-only loans with terms lasting to ten years.