Current Commercial Loan Terms and Rates

[Aayush S.]

Hello BP,

I recently found an 8-plex property on the market and I'm wondering what the terms are for a commercial loan in order to get that property. So far I've been seeing 5-year terms, 20-year amortization, and below 6% interest rate. Could someone provide some insight on the current rates they are seeing and whether or not the terms given to me are common? Please feel free to PM me or post below.

[Jonathan Bombaci]

@Aayush S. check out local credit unions or call any banks you have a relationship with to see their terms. The terms will vary based on they type of property, the location, your experience, and your strength as a borrower. There is no “Industry Rate” or “Standard Terms” on the commercial side which I think you’re seeing based on the previous posts. 

We just closed on a 6 unit in Fitchburg for our personal portfolio and it was 25% down, 15 year loan, at 3.5% interest, fixed for 5 years, amortized over 25 years, with no prepayment penalty. 

We received similar rates on a property we closed in Lowell about 6 months ago with the same lender. 

Closing costs will vary as well based on many factors. I’ve paid $1200, $2500, $3500, and $7500 for commercial appraisals. Insurance can also vary substantially depending on property type and location. Assuming it’s a $500k, vanilla residential units, Class B commercial property that does not require any environmental testing or flood insurance, I’d estimate 2-3% or $10-15k in closing costs. Your lender can give you a better estimate once you have the property  under agreement and start your loan application. 

Commercial financing is the wild Wild West, go establish a good relationship with a lender and they’ll work with you on terms over time once you prove yourself. 

Best,

Jon