![]() ![]() However, the LTV ratio on a construction loan is generally higher than a standard investment property loan so you won’t have to put as much cash down. You’ll pay higher interest rates for building rather than purchasing an investment property - rates currently range from 6.74% to 8.15% - because constructing a new building is a riskier endeavor than purchasing a finished one, so banks charge higher interest rates to compensate for this risk. Average commercial real estate loan rates for building an investment property We recommend borrowers consider local banks and mortgage lenders over national ones, as these institutions have a greater interest in investing in local communities. Be prepared to shop around to get the best deal and to negotiate the terms of the loan contract. A substantial down payment could help you get the most favorable rates and terms. To qualify, you’ll also need a proven track record of managing investment properties, a strong investment pitch and sufficient cash for a down payment. A FICO Score of at least 620 would increase your chances of being approved. Regional banks, credit unions, and commercial mortgage companies are the best options for obtaining an investment property loan. So, if you purchase a $1 million building, the lender may only give you a loan for $730K, meaning that you’ll have to put $270K down. On average, the LTV ratio for these types of loans is between 66% and 73%. However, the LTV ratios on these loans will be lower than owner-occupied commercial real estate loans, meaning that you’ll be required to put more money down. An investment property loan would allow you to purchase a property to renovate and resell for a profit. Interest rates on investment property loans can be as low as 3.77%. Average commercial real estate loan rates for investment properties In this situation, you should consider commercial mortgage companies that specialize in subprime lending or look for bridge or hard money loans. If you have a lower credit score or less-than-stellar business finances, or the financed property needs renovation, you’ll pay higher interest rates and have to put more money down in order to get a conventional commercial real estate loan. The application process for a traditional commercial real estate loan requires a lot of time and documentation to complete, and prime or near-prime borrowers are most likely to qualify.
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