The differences between Texas Commercial Real Estate Loans and residential loans are quite simple. If you are considering a loan specifically for your business real estate, then keep in mind these important components.
Texas Commercial Real Estate Loans are given to business entities like corporations and developers instead of just individuals. The funding is usually used for remodeling, revamping or adding more locations. Since a business most likely doesn’t have a financial track record or credit score history, lenders may require owners of the entities to be the ones responsible for showing their credit score and financial history. This means that these individuals are responsible for having excellent credit scores to get approval.
The terms can range quite a bit when it comes to Texas Commercial Real Estate Loans as well. Most of these loans are for around 5-20 years, but the amortization period could actually be longer than the term of the loan. For example, a loan could have an amortization period of 30 years, but the term of the loan might only be 8 years. The length of these periods will affect the rate of the lender fees, so always keep that in mind. It can really depend on the credit score and these terms are usually negotiable. Remember, the longer the period of time is for repayment, will result in higher interest rates.
Another factor to pay attention to is loan to value ratios. This is calculated by the lender and measures the value of the loan compared to the value of the property. It is not common for loans to be approved when the loan to value ratio is high. Of course, this can depend on many things, like the category of the loan.
Expect Texas Commercial Real Estate Loans to Have Higher Interest Rates
Not only are you going to see higher interest rates for these loans compared to residential loans, but you are also going to experience higher fees with Texas Commercial Real Estate Loans. All of these fees will add on to the cost of the loan. Some of these fees include legal, appraisal, loan application and survey. Most of these loans tack on fess, so pay attention to the extra fees when shopping around.
Be Prepared for Certain Regulations on Real Estate Texas Commercial Loans
Prepayment restrictions are also common for these types of loans. This can happen if you decide to settle your debt before the actual due date. When this happens, you may be responsible for paying penalty fees. The most common prepayment penalty is calculated by multiplying the current outstanding balance by a certain penalty amount. Another common fee is interest guarantee. A lender is often times entitled to a specific amount of interest, even if the balance is paid off early. So, you may be charged with paying the lender if they do not receive the guaranteed amount of interest.
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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