Even if you have some experience dealing with home loans, a loan for commercial property is very different. This article will detail the ins and outs of investing in commercial real estate lending. As you learn more about real estate investments, you will also learn how to select an investment property that’s right for your long-term financial strategy.
Banks and other money lenders consider several factors to determine how much they can give you. These factors include the kind of property you need, your planned use, your anticipated returns, and any perceived risks and market conditions. Hence, you need to equip yourself with all the information before seeking a loan for commercial property in New York.
Fixed Or Variable-Rate Loans
Compared to most other business loans available in the market, commercial property loans are among the few variable-rate loans. These loans tend to extend over a long period. So, when applying for a commercial property loan, you can decide if you want a fixed-rate or flexible loan.
Regardless of your choice, you will be supervised for your commercial property loan for a few years. If you decide to sell your investment property within this 2 to 3-year period, you might incur some penalties. If you are sure about having a predetermined cash outflow for the next two or three years, opt for a fixed-rate loan since it offers you more stability and certainty. Remember, a variable loan might start a little cheaper; it can easily vary depending on the situation of the market and fluctuations in interest rates.
The Total Duration of Your Loan
Like homeowners, business owners must also consider how long they want their commercial property loan. The longer your loan term, the more interest you will pay. When it comes to a loan for commercial property, several money lenders and banks in New York offer a repayment period of 25 to 30 years. However, you can extend your loan period by getting a cash-out refinancing loan after you gain enough property ownership. Before you select a commercial real estate loan, you should consider whether you have the financial capacity and willingness to take on such a long-term loan.
LTV (Loan-To-Value Ratio)
The LTV (loan to value) ratio measures the total amount of your mortgage with the appraised value of your real estate property. The higher your down payment, the lower your loan-to-value percentage. In most cases, money lenders and banks use your Loan-to-Value ratio to decide whether they should lend you the money. Generally, money lenders and banks in New York can easily stretch out 70% to 80% of your real estate’s purchase price or valuation. However, your credit standing can affect the total amount a lender would be willing to give you.
Eligibility
To get a commercial property loan, you must meet specific eligibility criteria set by banks and money lenders. For small businesses, banks and financial institutions often require them to be incorporated locally for at least one or two years.
Any Extra Costs
When you purchase a commercial property, some extra costs will always be involved. These may include valuation fees, legal fees, real estate agent’s commission, and the time and effort you must invest in finding the right investment real estate. Depending on your financial institution, you may acquire a subsidy on your valuation and legal fees. You will still have to manage several outgoing costs after the purchase. These include income tax (if the property is partially or wholly rented out) and regular maintenance fees. Moreover, you will have to pay 10% of your real estate’s annual value in property tax every year.
Most real estate investors tend to establish a deep banking relationship with a New York bank. If you want to make accessing a loan more seamless and convenient, it’s best to take a loan from the bank you have an existing relationship. It will surely help you minimize the documentation requirements since the bank already has access to your details and current financial situation.
If you have any questions related to loans for commercial properties or would like to apply for one, contact Real Estate Funding Solutions immediately! Besides banks, various reliable money lenders in New York can offer fantastic loan terms. Look for a trusted money lender to ensure you select the right loan for your needs.
Real Estate Funding Solutions Can Help Answer All Your Loan-Related Questions.
Commercial property loans can be pretty beneficial. However, they can also be quite challenging to navigate all by yourself. If you have any questions related to loans for commercial properties, we suggest you speak with the Real Estate Funding Solutions experts immediately. Our professionals have years of on-field experience and training and can help you qualify for a commercial property loan in no time. With our help and professional guidance, you can find the best loan terms for your next investment property purchase. Call us at 855-913-8637 for more information!