What is a commercial real estate loan? A commercial loan is a type of mortgage in which a lender agrees to supply funds for a specific purchase that covers more than one property. In other words, it is used to finance the acquisition of commercial real estate. Commercial real estate loans are short term or long term loans for the acquisition, development, or renovation of commercial real estate with more than five units. Some commercial real estate loans are made for multifamily properties.
The commercial real estate loan can cover many expenses. It includes one-time payment of a mortgage, the interest on the loan, and property taxes and other related expenses. Commercial real estate loans are best suited when the seller or buyer has the capability to pay a few months rent, make one or two payments every month, and still meet all the expenses. With multifamily loans, there is less room for uncertainties. The lender makes sure that the properties will be able to withstand the market.
What are the differences between conventional financing and multifamily loans? Although both loans have similar features, there are crucial differences. Conventional financing is obtained by acquiring the loan using the money from the borrower’s own savings, credit cards, business financial accounts, personal loans, etc. The application process involves a credit search to ascertain the borrower’s financial ability to repay the loan. This can be a time consuming process. There are also significant financing fees involved.
On the other hand, multifamily loans do not require any credit search. Multifamily properties such as apartment buildings, condominiums, and town houses can be financed through traditional methods. Borrowers with good credit can qualify for conventional loans. They just have to find financing sources that specialize in multifamily properties. The process of obtaining a loan can take less time because it is often less complicated.
You can obtain conventional multifamily mortgage loans from banks and lending institutions. There are even some banks that offer short-term multifamily loans at competitive rates. There are even government-backed multifamily mortgage programs. A government-backed program may be the best way to secure multifamily loans. The government will guarantee payment of the loan even if the borrower defaults.
If you opt for conventional financing, you can visit Corevest Financial Corporation for information on the different options available. They have an online loan calculator for calculating your monthly payment and other financial details. To get your loan approved, you should have a steady income from various sources. As long as you have paid your mortgage in full and your credit history is impressive, you will most likely get approval for your cbre multifamily capital Multifamily loans.
If you opt for commercial real estate lending, you have two choices. You can choose to finance a development project through lenders or developers. Lenders will require a down payment, which is typically 15%. This is not uncommon in large projects.
The disadvantage of securing conventional mortgages is that borrowers must obtain a loan before the development is completed. They may also be required to pay for construction costs. However, given the current real estate downturn, borrowers may find it more feasible to opt for multifamily properties loans.
Another advantage is that borrowers have a choice of acquiring one mortgage for a specific period of time, as opposed to acquiring several long-term loans. A borrower has to secure a long-term loan with conventional mortgages. With a multifamily loan, he can secure a loan for only five units, which is less expensive.
A significant disadvantage of conventional multifamily loans is that they do not contain provisions for borrowers who are cash poor. Moreover, in case the project becomes unprofitable, the lenders may foreclose. For borrowers who lack funds to guarantee a loan, the only recourse they have is to opt for property foreclosure. This means that borrowers will lose their homes. As such, they have to make sure that they would be able to fulfill the loan agreement.
On the positive side, conventional short-term loans provide borrowers a flexible option that they can use in case of emergencies. They also offer higher interest rates and shorter repayment periods. The rate may vary depending on the type of loan, the down payment made and the duration of the contract. Multifamily loans on the other hand are long-term loans, which makes them attract lower interest rates. Moreover, they are more expensive when compared to conventional multifamily loans. With a short-term loan, borrowers are allowed to secure a property for at least three years, although the maximum period of time might be up to five years.