The scenario you gave is typical, 10 year fixed, 25 year am, 70 LTV. All of that is typical.
If your scenario has a VERY STRONG Debt Service Coverage Ratio, you may be able to get a knowledgeable mortgage broker to locate a higher LTV for you.
Although if you take a higher LTV, do expect at least a slightly higher rate, especially if you are looking to fix your rate for a longer period of time.
Adjustable rates, and balloon mortgages are prevalent in commercial lending. So in the event you do find a straight fixed rate on a loan with a 25+ amortization, consider yourself lucky.
I am a newbie to commercial real estate; I never took a commercial loan before but have to take one soon. Donâ??t know anything about commercial lenders or how to find a reliable one. Also how do commercial loans differ from the residential loans? Any useful responses will be tremendously helpful.
Re: Commercial lending 101 - Posted by brandoncbsre
Posted by brandoncbsre on March 14, 2009 at 06:57:30:
First you can finance anything with a commercial loan from load of lettuce to a single family home to the Mall of America.
Commercial lenders are in virtually every small bank across the country. Depending on the size and location of your target you may want to work with a local bank or big name with a local office.
Terms are typically 15 or 20 year amms with small banks. With bigger projects and loan amounts you can find lenders that will go 25 and sometimes 30 year.
It might help responders if you post what it is you are trying to finance.
Great tip, Always paid cash for the lettuce but no more
Thank you for the helpful information. To your question, I am in process of buying an office building, it’s about 8000 SF for $3.7M-- it comps well to other oppurtunities in the area. The owner doesn’t provide any financing, so we will need to come up with the down payment. My questions are:
-What are the typical LTVs in the commercial world?
-What are the going rates?
Expect to bring 25% down plus closing costs and pre-paids (insurance, taxes, etc…)
Also expect to pay 2k-4k for the appraisal, and expect the loan process (from application to closing) to take at least 60-90 days. The reason is that appraisals take much longer in commercial than in residential.
It is a completely different ball game than residential. But any good loan officer will be able to explain the other, more minute differences.
Re: Commercial lending 101 - Posted by brandoncbsre
Posted by brandoncbsre on March 14, 2009 at 14:52:36:
You will more than likely be looking at 75-80% LTV. For a deal that size you may be able to get the 25 or 30 year amm I mentioned earlier and the rate could be anywhere from 5-8% or higher. Alot of this will depend on the quality of the tenants and other factors. For a loan this size I would be talking to national banks with offices local to the property as well a good broker who can do these deals.
I am a huge supporter of working with small local banks. However most have a lending cap that they cant go over due to capital structures. For instance the bank I work cant loan more than $2.2 million to any one individual. Or so I was told. I havent even close to that number to verify it though.
I spoke with First Republic bank in CA and the terms weren’t all that promising. 10 year fixed at 6.8% with 25 yrs amortization and a possible 70% LTV. Called Bank of America, citi bank and Wamu/chase, they don’t either loan to none owner occupied properties or don’t loan commercial at all. Does getting a commercial loan suppose to be so bleak and grim? To tell you the truth I am getting a little concerned about the financing part of the deal
