Purchasing a commercial property can offer many benefits. But you need to fully understand the process before you apply for commercial loans Texas.
Most consumers know that a commercial property loan is a little bit different than a residential loan but they are not really sure how the two differ. When you research commercial loans Texas you will learn that commercial mortgages charge higher interest rates and often there are more restrictions written into the loan agreement than in the case of a residential mortgage. But borrowers who are savvy know that using a broker who specializes in commercial loans Texas can offer some great benefits. Brokers have access to second tier lenders who are willing to offer more competitive interest rates and lowers fees. These commercial loans Texas can be almost as cost effective as a residential mortgage loan.
Most first time commercial loan borrowers also don’t realize that they are going to need to make a more substantial down payment that they would on a residential property purchase. In some cases you might be required to pay 30% to 40% down. This is because the value of commercial properties can fluctuate much more and even more rapidly than residential properties. Lenders want to be sure that there is always equity in the property as that assures them of a means to recover their money if you default on the loan.
Another surprise for many new borrowers is the term of a commercial loan. A residential mortgage is commonly 30 years but a commercial mortgage can be as short as five years. The longest commercial mortgage loans are 20 years but most lenders will only extend the loan to 15 years. This means that you should also be expecting a higher monthly payment due to the shorter time frame of the loan.
What to Know If You Plan to Lease Space
If you are planning to lease part of the space in your new commercial property then you will also want to learn about the most common commercial lease terms. These terms can be very beneficial to you as you are depending on the lease money to help repay your commercial mortgage. Unlike the standard one year lease on a residential property, commercial buildings often require a longer commitment from the tenant. The most common terms are 3 years and 5 years. In addition it is very common to offer a 3 or 5 year option to allow the tenant to extend their lease after the initial term has expired.
Know What to Expect in Fees
Commercial loans require property appraisals and environmental tests to make sure that the property is not contaminated. These fees are passed on to the buyer and so are many of the administrative fees. You can expect to pay an application processing fee which is due prior to processing. This fee and the appraisal fee are normally nonrefundable. If you are approved then you will be asked to pay a processing fee, legal fees and points in addition to the interest on the loan. Knowing what to expect and how the process works can help to eliminate some of the stress that you will experience the first time that you are applying for a commercial property loan.
Dennis Dahlberg
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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