What is a commercial real estate loan? How do you find borrowing options that apply to you? Commercial real estate loans are not the same as home loans. There is more to these kinds of loans that you should learn about.
Are there different kinds of commercial real estate loans? How much down payment would you need for them? What rates do commercial real estate bridge loans offer?
Below we explain to you some points about commercial real estate loans and how they work. Before engaging in any type of commercial loan it helps to study them first. Continue reading to find out more!
Defining a Commercial Real Estate Loan
A commercial real estate loan or CRE is what you call an income-producing property. This property is only used for business rather than residential functions. The financing, development, and acquisition of those properties come from mortgages. These mortgages on the commercial property are being secured by liens.
Kinds of CREs:
- Office Buildings
- Retail Malls
- Shopping Centers
Specific Loans You Can Apply for Under CRE and Their Rates
- SBA 504 – Rates are from 4.38-4.49%
- SBA 7(a) – Rates are from 5.25%–9.25%
- Traditional Bank Loans – Rates are from 5.00%
- Bridge Loans – Rates are from 5.72% – 11.72%
- Construction Loans – Rates are from 5.72% – 9.72%
- Hard Money Loans – Rates are from 10% – 18%
To further understand how important rates are, you need to know what loan fits you well. There should be certain factors that affect your decision making. Each lender is different and their terms will play a big role in the loan rate you get.
Always research on the loan type you are getting. Look at your credit history and see if you fit the loan requirements. Check if you can afford a longer loan or a shorter loan term.
Where Can You Use a Commercial Real Estate Loan?
You can find commercial real estate loans for nonprofit organizations that fit your finances well. These types of loans can also come with flexible terms. You can even choose your own adjustable rates, whatever works for you best. There are loan terms that reach up to 20 years as well as loans secured using a mortgage on the property.
In case you are buying a property as an investment using a conventional loan, you will need a down payment. This will need you to put a down payment of 20% to 30% cash, but it also depends on the lending terms. A commercial real estate loan down payment will also get you favorable terms and rates. Most CRE loans need you to have a track record in managing, investing, and having enough funds.
If you’re looking for commercial real estate loans with no down payment. Don’t worry there are ways around this. below are some no down payment options you can try:
- Getting a Partner on the Investment
- Considering Sellers Debts
- Using Personal Property to Swap
- Exchanging Property With Cash
- Getting a Lease With the Option of Buying
- Getting Financial Help from the Seller
- Borrowing Money from Others
- Assuming the Existing Mortgage
- Combining Mortgages
- Negotiating the Contract
Should You Worry About Fees and Other Costs?
Interest is the biggest thing to consider when choosing a loan. Before you take out any loan, you need to note if there are extra fees. Double-check if there are prepayment penalties as well. Consult someone who has knowledge or experience of the loans you want to take out to be sure of your decision.