Is the financing a good deal on this property?
Hello Everyone,
This is my first time posting here and was hoping to get some assistance in reviewing the loan terms I've received from a local bank. Are they good? Are they pretty standard? This is my first time seeking a commercial loan for a purchase so I'm not sure what is the norm and what is excessive. The reason I have to go with a commercial loan is because this single piece of property has two homes on it and would make it difficult for a traditional loan.
The plan is to separate the two properties and then flip both of them. Cost of the property is going to be about $375,000. I should be able to sell both properties for about $650,000 combined after putting in about $100,000 in renovations in both homes over a 4 month period.
Thanks in advance for your advice.
Mike
TERMS
Collateral: First Deed of Trust on said properties and Assignment of Rents
- 25% equity injection required
Amount: $300,000 (approximately). (In no case shall the loan amount exceed 75% of the appraised value of the real estate securing this Loan).
Interest Rate: 5.1% fixed interest rate during the Permanent Period per annum.
Repayment: For a period of 60 months (the “Permanent Period”), monthly payments of principal and interest shall be based upon a 20 year amortization. The principal balance and all accrued and unpaid interested shall be due in 5 year(s) from the date of the note.
Appraisal: Subject to satisfactory receipt and review of the appraisals from an appraiser acceptable to Bank not to exceed 75% loan to value. The appraisals shall be at the expense of the borrower. The cost of said review, payable by the Borrower, will be $350 for each appraisal.
Origination Fees: One half of one percent (1/2%) equal to one thousand five hundred dollars ($1,500) of the loan amount payable upon acceptance of the commitment letter. There will also be a loan documentation fee of $300 due at closing.
Prepayment Fee: During the Permanent Period, any portion of the Loan which is prepaid will be subject to a prepayment penalty as calculated below:
- During first year of loan term 5%
- During second year of loan term 4%
- During third year of loan term 3%
- During fourth year of loan term 2%
- During the fifth year of loan term 1%
Please note the prepayment penalty will not be enforced if the property is sold through an arms length contract.
Loan Cost: The cost of the Loan, including, but not limited to, insurance, document preparation, attorney fees and filing fees, will be borne by the Borrower
Hazard Insurance: Required on all insurable collateral.