Do you have an office building, a rehab, or a multi-unit apartment building? With commercial real estate loan rates at one of their lowest, now may be the right time to consider a loan for your next real estate investment.
If you are an owner or looking to purchase a commercial property, there’s good news to be had: Commercial loan rates remain at an all-time low. With the Federal Reserve promising four rate hikes this year, this may not be so in the future. For this reason, this may be the perfect time for you to purchase or refinance a commercial property. Level 4 Funding has the team that can help guide you through the process and help you feel like a well-informed purchaser. Let’s take a look at how commercial real estate loan rates work and the interest rates the different types of lenders charge.
If your Credit Score is 680, you’ve been in business in 2-plus years, and plan on occupying 51% of the building, you may qualify for a SBA 7 (a) loan. If your project is between $2 and $3 million dollars you may want to explore the opportunities for financing from insurance companies and conduit lenders.
Commercial Real Estate loans have lower interest rates because they are collateralized by the commercial property. There are four factors that affect the interest rates for the Commercial loan. They are:
1) The Business and Customer creditworthiness: Your rate will be determined by the credit score of the customer and business, the higher credit score the lower rate.
2) Is the commercial real estate loan fixed or variable? A fixed rate loan is a loan that has a fixed rate for the term of the loan. The variable rate loan is reset from 1 to 5 years and will be adjusted based on current rates. Most people will not qualify for fixed rates.
3) What is the term and size of the loan? Hard money lenders offer loans with higher rates and shorter terms while conventional lenders offer longer loans with lower rates.
4) Prevailing Market Rates: Interest rates move up and down based on the government bond market. Keep informed about the movement in the government bond market and how they will affect your rate.
The Lender Has the Biggest Impact on your Rate
1) SBA loans--rates run 4.75% to 9.25%, the 504 loans are best for loans over $1, 000,000 and come in three parts: 50% from the bank, 40% from the SBA and 10% from the borrower. You will need a credit score of 680+.
2) Hard Money Loans--Rate run 10% to 18% and covers about 20% of the market. The rates are high because the loan is not based on the credit worthiness of the borrower but the value of the property. The loan-to-value runs around 55% for many hard money lenders.
3) Other Lenders--Only a small amount of loans come from Insurance companies and Conduits.
Commercial loans can be structured in three ways: fully amortized loans, interest rates resets, and balloon payments.
You may want to purchase commercial Real Estate or refinance a commercial property. There are wide varieties available for high credit scores and lower credit scores. Call and counsel with Level 4 Funding to find what works best for you in your situation. We offer rates as low as 7.99 percent.