Commercial Loans at 90%
Posted March 16, 2009 – 4:23 pm in: Finance
This financing option is very rare in today’s economic market, if it is even available. Not long ago, some lenders offered 90% financing with rates that were about 1-3% higher than 80% financing rates. However, there is still a way to obtain 90% financing on your investment properties. That is to have the seller hold a second lien purchase loan. Again, many lenders will not allow a second lien loan. You can still find a lender who will do it. On the other hand, if you have a “cash cow” you might get lucky at 75%-80% financing. Adding the additional 10%-15% may put your property cash flow in the red.
A bank may also increase their debt coverage ratio to avoid commercial loan default. This will include the debt payments on both their loan and the second seller. Your property must be priced right with a high cap rate to get this.
Other options than the 90% financing are available to business owners. There is the commercial 30-year fixed, 5-year fixed, 7-year loan and the SBA 504 program that allow a buyer to purchase commercial property with 90% financing.
The 5 -year fixed has the lowest rates and the program does not require any fees on the loan. The commercial 30-year has the longest fixed rates; however, they are the highest of these options. The 504-program loan is in the middle with fixed rates most of the time within a 10-year range; however, this program does have the most expensive fees.
Of course, if you wish to avoid commercial mortgage foreclosure you can always look at getting a commercial loan workout.
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