Commercial Real Estate Financing Options

Loans on commercial real estate typically require a larger down payment than the loans on residential real estate, although smaller, local community banks and portfolio lenders tend to be more flexible when it comes to loan options. 

When it comes to getting a loan from the bank, think of it as shopping for loans.  In the past, the bankers used to be very powerful and you would be happy if they approve you for the loan.  Today, lots of banks want to fight for your business, so when you call the lenders, they are trying to sell you on why you should get the mortgage with their bank. 

There are several questions you should ask the lender when you shop for loans:

1. What is the loan to value ratio (known as the LTV)?  If they say 80%, it means they are willing to lend up to 80% of the value of the building (which is generally determined by the purchase price and the appraised value, whichever is lower). 
2. What kind of interest rates can I expect?
3. Is the interest rate fixed or adjustable?  Or is it fixed for a number of years and then becomes adjustable? 
4. How many years is the loan amortized over? 
5. Do you offer interest-only loans?  What about Option ARMs?  Remember, to maximize your cash flow, an interest-only loan is better for you than an amortized loan, and an Option ARM is better for you then an interest-only loan. 

When you are applying for a mortgage, it pays to go to 10 banks.  Prepare a professional package on the building as well as your financial background, and send the package to 10 banks.  See what each bank is willing to give you the best terms, and you will be surprised that getting a mortgage is not as intimidating as it might seen if you have never done it before.  Again, the commercial agents at Advantage Commercial Brokers are happy to assist you with the process.