Commercial mortgage financing

When it comes to commercial mortgage financing lenders have different requirements. The requirements may include things like presentation format, property type, the minimum and maximum type of loan allowed as well as the location and quality of the building. When you are looking to find financing for a larger building like for a large apartment complex there is some critical information you will need. Because multi-family buildings are income producing you will only be able to obtain the loan for about 80% of the value of the property. With that in mind you need to know exactly what that value is not the cost of the property. The value of a property when it comes to commercial mortgage financing is found using the property’s Debt Service Conversion Ratio or DSCR. This is similar to the Debt to Income Ratio used by lenders to determine if an individual can afford to pay for a loan. Another thing to keep in mind when attempting to track down commercial mortgage financing is the condition of the property itself. Most lenders will not make a loan on a property that is considered in poor or fair condition. When such a property is financed it is often for a much higher down payment. If you have found a good deal on a multi-family building and are trying to find a loan for it there are many different commercial mortgage financing deals available including non-recourse loans, joint venture loans, apartment mortgage loans, structured financing and commercial rehab loans.

Banks

Banks often have special programs for commercial mortgage financing. These loan programs are geared toward the amount of the loan and are often tailored to fit your needs with repayment terms, pre-payment penalties, interest only terms, and the time to close your loan.

Private lenders

Private lenders often offer hard money loans for commercial mortgage financing. It may be a little harder to qualify for this type of loan though. You will need to prove you can manage the payments, the loans are often very short term and the interest rate may be higher as well.

Joint Venture

Joint venture loans are a great way to find commercial mortgage financing. A joint venture is when you take on another person of business as a partner sharing the costs and the profits. Generally speaking this can work out well for you but you have to do a lot of research to find the right joint venture capitalist. Another thing to watch for when you do finally find a loan that will work for you is the types of financing you procure. Whenever possible you will want to try and get a nonrecourse type commercial mortgage financing deal. A nonrecourse loan is probably the best type of loan to procure when it comes to commercial mortgage financing because the property itself is the only collateral and the only forfeiture. If you do end up losing the property because you default on the loan you will not be held personally responsible for the remainder of the loan. It may sound a bit like a cop out but better to lose the property then your own personal bank account and other assets as well. When looking for commercial mortgage financing it is best to do your research thoroughly and leave no stone unturned. Commercial real estate can lead to great financial success when done right but you have to be careful to choose the right option for you.