Interest rates are on the rise since the economy is on the move. Last week the fed raised rates by .5%. If you are considering the purchase of commercial real estate, it is a good idea to look into various loan options to keep the rates and your mortgage payments as low as possible. Listed below are 3 different loan types for owner / users:
- Conventional Commercial Real Estate Loan – Mortgages that are provided by banks, credit unions, and other types of financial institutions. Requires 20-25% down payment. Loan process is generally quicker – 45 – 60 days.
- SBA Loan (Business Administration) – Government backed loans that offer programs such as 504 and 7A. Down Payments range from 0-10%. The process takes a little longer than conventional financing. AS of this blog a buyer can find loans in the 5% – 5.25% range blended between the bank and government and fixed for 25 years – Closing takes 60-90 days in some cases.
- Owner Financing – Sellers who own properties free and clear may offer to be the bank or carry the loan. Lower closing costs than banks, less red tape dealing with third party reports such as appraisals, environmental and ALTA surveys, higher down payments 30 – 50% down in many cases, flexible payment schedules which could include interest only, longer amortization schedules, options to refinance with a bank with minimal penalties if any. Closing can take 20 – 30 days in some cases.
Interest rates vary according to the type of loan, the amount of money borrowed, the length of time and the credit history of the applicant. It is always best to speak with a professional when considering a commercial loan.