Commercial Real Estate Financing with Interest Rates UNDER 6.00%
The real estate market has suffered recently due to the sub prime debacle. Banks and other lending institutions were lending money to borrowers who were overextended with little verification or due diligence. While these borrowers are walking away from their properties, the responsible people who are ready to buy real estate are finding that lenders are now very skeptical to who they lend money to and where they where the property is located.
Many lenders have also increased their spreads. This means that they have increased the the portion of the interest rate that they add to the index (such as Prime, Libor, etc…) to compensate for risk. Many lenders who used to sell their loans as soon as they funded are finding that there are not many people who want to invest in purchasing mortgages, and the ones who do, now demand a much higher return on their money.
Because of this, interest rates have risen and this has also effected commercial financing. Many people now who could have gotten a 10 year fixed rate loan on a commercial property are now finding it hard to find the same loan for under 6.50% and they are settling for what they can find.
Are there still any fixed rate loans under 6.00%? YES!
It will take a little more due diligence on your part as a borrower, but there are lenders who still offer fixed rate loans under 6.00%. Most of the lender who do “Portfolio” their loans, or keep them on their books and do not sell them. They may require the loans to be a little stronger than before, but if you are a well qualified borrower and are trying to finance a multi-use property, then there are still some great loan options available to you!
Posted by Chad Pitt, Sr. VP of Commercial Alternative
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