Commercial Real Estate Loans
Is your business looking to renovate or acquire new premises? Are you able to cater to all the finances to complete that project? Maybe you don’t. All you need to get is a commercial real estate loan (CRE) from one of the best lenders in the Commercial Real Estate Loan Pros of Gainesville.
What is a Commercial Real Estate Loan?
A commercial real estate loan is a loan commonly made to corporations, limited companies, trusts, and developers from banks, private investors, insurance companies, or independent lenders. These types of loans generally last between five to twenty years. The loan amount is mostly between sixty to eighty percent of the value of the business.
Commercial real estate loans often have a more extended amortization period compared to the term of the loan. For instance, the amortization period maybe twenty-five years, whereas the loan term is five years. Therefore, these loans repayment schedule mostly ranges between five to twenty years. In this scenario, the investor could pay for five years in installments for the amount to be paid in twenty-five years then have one final large payment for the remaining amount.
If the repayment period is long, then the interest rate will be high, and this will be affected by the investors’ ability according to the business’s credit score.
Loan to value ratios (LTV).
The loan to value ratio in commercial real estate loans is a figure that weighs the value of the loan against that of the premises or building. It is calculated by dividing the loan amount by the lesser of the purchase price of the property. For instance, the LTV for a $ 70000 loan on a $ 140000 building would be fifty percent. Therefore, businesses with lower LTVs qualify for better financing rates compared to those with high LTVs. The reason being low risk to the lender as they have a better stake in the building or property.
Debt service coverage ratio (DSCR).
DSCR is achieved by dividing the annual net operating income (NOI) of the property by the annual mortgage debt service (interest and principal). For instance, a building with $70000 in NOI and $ 140000 annual mortgage debt service has a DSCR of 0.5. The higher the DSCR, the better the loan amount the business will get as a DSCR lower than one harms the business.
Commercial real estate loan interest rates and fees.
Interest rates for commercial loans tend to be higher than those of residential loans. CRE loans usually have fees added to the total amount of the loan. Fess such as loan origination, legal, appraisal, and loan application. A few of these fees should be paid before approval or rejection of the loan, while others apply yearly.
Prepayment may have some restrictions. For example, if the debt is cleared before its due date, the company will most likely pay some penalties. Some of these penalties are:
A prepayment penalty is achieved by multiplying the current outstanding balance by a particular prepayment penalty. Interest guarantees the moneylender is authorized to a particular amount of interest even if the loan is paid early. Lockout is whereby the business cannot clear a loan before a particular period, e.g., six-year lockout. Defeasance is where new collateral can be exchanged instead of paying money to the bank or lender. Prepayment terms may be negotiated with other terms of the loan before a loan is disbursed. For any assistance on how to get this type of loan, please feel free to contact Commercial Real Estate Loan Pros of Gainesville.
There are so many areas or regions where we offer these services with most of them being cities.
However, if you need any of these services, you need to contact us. The list below comprises the areas where we offer these services.