A Guide to Commercial Real Estate Loan Rates

Commercial real estate loan rates are currently at very reasonable rates making this a great time to consider purchasing commercial property. Learn more about the different loan options and the rates that are associated with them.

Commercial real estate loan rates are all at a very favorable point for borrowers. Rates are at or near historic lows and that means that buyers will be paying far less in interest than they would have a few years ago. Learning about the different types of commercial loans that are available and the interest rates associated with them will allow you to make the best selection when you are applying for a commercial loan. You will quickly discover that the type of lender that you select will have the greatest impact on your commercial real estate loan rates.

An SBA loan is often going to offer the best interest rate to lenders. The SBA 504 loan, which offers a fixed rate on the SBA portion of the loan and variable or fixed on the bank portion, is available at a rate of 3.5% to about 6% currently. These loans are fairly challenging to acquire but the SBA 7a is less difficult to qualify for and is offering interest rates between 5.5% and 6.75% at a variable rate. Conventional bank loans with both fixed and variable rates are financing between 5% and 7% and have fairly restrictive qualifications for the loan. A credit score of over 660 and a down payment in excess of 20% will qualify for terms of 5 to 10 years in most cases.

Less conventional commercial real estate loan rates tend to be a bit higher but they do offer the borrower less stringent criteria to qualify for a loan. Hard money loans are ranging from 10% up to 18% and offer a term of six months up to around twenty four months. The rates are higher because the loan approval is based primarily on the value of the property being purchased and not the borrower’s creditworthiness. A newer alternative for borrowers is the online lender option. These are sometimes referred to as soft money lenders as they charge a higher rate than banks but less than the average hard money lender. These rates are ranging from 8% to 12% and will typically finance for six months to five years.

Know the Terms

Not only do the interest rates vary as you begin to explore different types of lenders but so do the terms of the loans. Some will offer only very short time frames while others are willing to offer a longer repayment period. Another key factor for many borrowers is that some lenders will offer a balloon payment at the end of the term. This is a great way to lower your monthly payments but can be difficult to pay when the final payment comes due. Many borrowers are forced to refinance the final payment on a balloon loan.

Take the Opportunity

If you have been considering a commercial real estate purchase then the current interest rates could make this a great time for you to buy. But as with any major transaction, invest the time needed to learn about the market and your loan options so that you make a wise purchase.

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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