Commercial real estate loan rates vary dramatically depending on the lender. Other factors that may come into consideration is your creditworthiness, size and term of loan, and the market.
Commercial real estate loans are on the rise thanks to a slightly sluggish but still upwardly mobile economic trend. Multifamily has been particularly active in recent years. Fortunately for borrowers, there are several institutions and individuals that are willing to offer commercial loans in this present environment. Let’s run through a few and share the commercial real estate loan rates as of October, 2017:
· Conventional Bank Loan: 5 to 7 percent with 5 to 10 year balloon payment.
· Credit Unions: Their mortgage rates are, on average, approximately 0.3 percent higher than banks.
· SBA: They have several types of commercial real estate loans that range from 3.5 to 6.75 percent. They offer longer terms than other commercial lenders, but they are also difficult to qualify for.
· Online Lenders: They have an extremely wide range—anywhere from 10 to 40 percent depending to a large degree on the project and terms.
· Private Hard Money Lenders: These individuals and small groups also have a wide range though they tend to fall in the 10 to 20 percent bracket.
In addition to your project, terms, and collateral, there are other lending factors that will help determine your commercial real estate loan rate. One of these factors is your credit score. Almost all lenders require you to have a credit score often in the 680 to 700 plus range. The one exception is private hard money lenders who place more emphasis on the hard-asset or collateral that you are bringing to the table. Another factor is the amount and length of the loan. Generally, the more the loan and the longer that you are going to pay it off, the higher the interest rate. The type of loan and the current market trends will also affect your rate.
Whether you qualify or not will often boil down to these factors: your asset, debt-to-income ratio which ensures the lender that you’re are not toppling over with debt; debt service coverage which is a ratio that ensures the property is making enough money to cover the loan payment; and loan-to-value ratio which ensures that the collateral you are using is more than enough to cover the loan. Most lenders will not go over an 80 percent LTV, meaning you will have to come up with 20 percent of the required funds.
Time to Funding
Conventional banks, credit unions, and The Small Business Administration can take a month or more to fund your project. In today’s market, that can mean a missed chance at a prime piece of property.
Of all lenders, private hard money lenders offer the fastest approval to funding time.
If you’re in need of capital now, give us a call at Level 4 Funding. We offer some of the fastest approval and funding times for private hard money loans. You will get your approval in as little as 24 hours and receive your capital in as little as two days.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.