Buy Your Dream Property Through Commercial Real Estate Financing
By: Celeste Parker | Posted: 31st August 2006
It requires huge funding for buying a real estate but not many aspirants can afford the finance from own sources. Therefore, commercial real estate financing becomes a necessity in gaining access to much needed funds. Through availing commercial real estate financing, one can build, purchase or refinance commercial properties like offices, hotels, apartments, warehouses, guesthouses, pubs, shops, nursing homes, industrial facilities etc.
Because of huge amount involved, commercial real estate financing is essentially a secured one. The lender would like to secure the financing by taking in possession the title deed of the concerned property. The title deed will remain with the lender till the loan is fully paid back. Another requirement is that the borrower should give a down payment which is often 20 percent of the real estate value.
For a commercial property purchase lenders can offer £1000000. The financing however will depend a lot on credit history and financial standing and repayment capacity of the borrower. Annual Percentage Rate on commercial real estate financing ranges from 6 to 20 percent. One can opt for variable or fixed rate of interest. Variable interest rate may be lower at the time of the financing deal but as it is determined by market, the rate may even escalate in future to harm the borrower. Fixed interest rate remains constant irrespective of changes in the market rate. The borrowers can pay back the loan in up to 30 years.
Before sealing the financing deal, the lender would like to ensure if the project or property is worth lending a huge amount. To evaluate the property for its viability, lender looks into the income it produces as compared to debts and interest on it. If the ratio of net operating income divided by debts, called debt coverage ratio, is above 1.2 then financing the project is considered safe. A ratio below this indicates that property is loosing money or anyhow breaking even. Some lenders like to see debt ratio which is arrived at on dividing monthly debts or housing expenses by gross monthly income. Usually debt ratio of above 25 percent is not considered safe for investment by the lenders but some may raise the bar to even 36 percent. So, lower debt ratio is more likely to ensure easier commercial real estate financing.
While searching for right commercial real estate financing lender, make use of commercial mortgage lenders database that enables direct access to your type of lender and therefore you avoid falling in the hands of brokers. The database is available on internet. All you do is to give adequate information in the commercial real estate financing application and the database matches information for locating the lender as per your loan requirement.
Commercial real estate financing enables you in acquiring the property of your choice. For a better deal you may hire a real estate attorney to scrutinize the offers from different lenders.
Celeste Parker has been associated with Commercial-Loan-Financing. To find commercial real estate financing , commercial real estate loan, commercial vehicle loan, commercial property loan in UK visit http://www.commercial-loan-financing.co.uk
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Tags: viability, debts, lenders, borrowers, annual percentage rate, warehouses, rate of interest, credit history, fixed interest, variable interest rate, fixed rate of interest, real estate financing, commercial real estate, nursing homes, title deed, debt ratio, operating income