I'm looking to buy a 7-unit property and want it over a 30-year amortization period. This is my first commercial loan and I'm wondering if anyone has suggestions on the best/safest way to structure this?
The best option I've seen so far is a 7 year fixed rate at 4.5% followed by a balloon.
Is there any reason not to go this route? Ideally I'd love an option with a longer fixed window but this seems to be the longest fixed rate I can find.
Thanks very much in advance,
What’s the size of loan? Recourse or Non?
It'd be about 321k though could be lower. And I don't know what recourse means but would be happy to learn!
Thank you for your response!
Recourse means you are personally guaranteeing the loan.
Basically, it means the lender can come after you if you default including any amount not covered by the property forfeiture.
Just curious what bank or banks did you contact for this kind of commercial loan?
I have been working with my mortgage lender to find banks in the area to work with so I don't know who we'll go with just yet.
Closing on my first 6 plex this month. Price is very similar to your example. It is a 7 year arm at 4.68% amortized over 20 years with 10% down. Hope this helps and best of luck.
There are longer terms out there, but the products are generally different. For example, you're looking at a bank product where the interest rate is low and the terms, a 7 year ARM with a 20 year amortization, are pretty good.
Below bank financing, where there can be substantial hurdles to jump on the way to closing, there are alternative funding sources that have less hurdles, but higher costs. We always recommend going the lowest cost way first, but if your initial loan falls short, know there are other options like a 25 year fixed or even a 3 year fixed period coupled with a 30 year amortization to keep your monthly payments low.
Congratulations on your first commercial property!!
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