Investing in commercial real estate and choosing the appropriate lender is quite a daunting task due to the risks and complexity. Under commercial real estate loans, people usually buy a property for doing business operations or giving a lease. The ultimate objective of this type of loan is generating higher revenues along with other benefits. Although, investors may face difficulties while applying for commercial loans for real estate. The lending policy, turnaround period, protection level, and pricing in commercial property loans are quite different from the residential one. Once you have decided to invest in a commercial property, try to find out the best lending solution and prepare yourself with adequate funds.
Common Properties of Commercial Loans for Real Estate
Borrowers: Individuals, organizations, start-ups, corporate borrowers, property investors, or trusts can apply for real estate funds.
- Loan Term: up to 15 years
- Type of Interest: Variable, as well as fixed up to 5 years
- Redraw: Allowed for prepaid amount.
- Line of credit: obtainable at a higher rate of interest.
- Capitalized Interest: usable for development purposes
Purpose of Availing Commercial Property Loan
Commercial loans for real estate are used mainly for meeting investment needs, refinancing a commercial property for lease, buying a leased property, funding your day-to-day business operations, or meeting any liquidity deficiency.
What Details Need to be Provided for Approval of a Commercial Property Loan?
Here is a list of some of the basic things you need to get approved to avail a commercial real estate loan-
- Income details, including earnings from rentals
- Detailed information regarding the existing lease, if any
- Proof of capability to maintain the property and repay
- Your equity share in other properties
- Your property details, including valuation and location
What Things to Consider While Applying for Commercial Loans for Real Estate?
Your application for a commercial loan will be approved based on your purpose of applying. Here is a briefing on the few factors you need to consider before applying for commercial real estate finance.
- Loan amount: As prices of commercial property are on a higher side, it’s obvious that the loan amount will be much higher than regular home loans. Whether your loan will be approved or not completely depends on your respective bank. They will decide whether you will repay the loan amount or not and by what period.
- Term: Commercial loans are covered under shorter-term contracts when compared to standard home loans. Most commercial real estate loans are given to a minimum of five to a maximum of fifteen years.
- Repayment options: Commercial real estate loans usually have flexible options regarding repayment.
- Fees included: Consider all types of fees you need to pay, starting from the upfront fees, application fees, loan establishment fees, and of course, maintenance fees.
- Yearly reviews: If you are applying for commercial loans for real estate, your business has to face an annual review. This process might require you to showcase all your bank details and trade history to your concerned bank.
If you plan to apply for commercial loans for real estate, it would be wise to get assistance from a mortgage broker who works in real estate property. Getting the right information about the market, product or pricing is not at all an easy task! A mortgage specialist can help you submit your loan to the proper lender in case of complicated transactions. In addition, studies have shown that most borrowers lose the opportunity to offer the most competitive offer by connecting a lender directly. Therefore, having a middleman like a mortgage broker is an additional benefit to match your lending needs.