Specifics of commercial mortgages from private lenders

Commercial real estates are those properties that are secured for commercial or business purposes. A mortgage for a commercial property is no different from a residential mortgage. One can take out a commercial mortgage from institutions like banks or credit unions, or even from private lenders. Read along to know about the specifics of private mortgages, for commercial real estate.


Facts to know about private mortgages

The following features are generally associated with the private mortgage loans, taken out for commercial purposes:

  1. Single individual or a group of lenders offer financial assistance in the form of private mortgage loans. Whereas institutional mortgages are offered by the banks, lending institutions, credit unions and government agencies, private mortgage loans are obtained from a private lender.
  1. Private mortgage lenders usually lend you hard money for shorter time period, to help you buy a new property. The loans are usually guaranteed with assets, and offer you the scope to cash out your home equity.
  1. The loan amount depends on the equity and the appraised value of the commercial property. Thus, you’ll be able to borrow more from your private mortgage lenders. Usually lenders allow a loan amounting to around 65 to 70 percent of a property, obtained for commercial purposes.
  1. Private mortgage lenders offer assistance even to borrowers with a poor credit score. They are willing to accept risks, if the market value of your house is high.
  1. The process for taking out a private mortgage is usually more rapid and simple than the institutional mortgages, since the lenders don’t spend time checking your financial details or credit histories. Moreover, you can even avoid going through the strict verification procedure that goes along with conventional mortgages.
  1. The private lenders usually charge high interest rates on your commercial mortgage. It is because they are willing to take up higher risks, and offer you immediate financial aid.
  1. Private mortgages for commercial real estate are usually taken out as bridge loans, until the borrowers get access to long term finances for the property.

Types of commercial lenders

Mortgage lenders for commercial properties can be categorized in the following ways:

  1. Portfolio lenders – The portfolio lenders usually keep details of the commercial mortgage loans in their own records till it matures.
  1. CBMS conduit lenders – Commercial mortgage-backed securities or CMBS, in short, are mortgages secured by commercial properties. The conduit lenders act as middlemen between the investors and the borrowers. They arrange the asset pools and issues bonds to the borrowers. The lenders then distribute the interest payments amongst the investors.
  1. Sub prime lenders – This type of commercial mortgage lenders help out people with low credit scores. Individuals with dismal credit history can opt for a sub prime mortgage for their ventures to purchase commercial property.

Usually, the lenders ask the business owner or owners to provide a guarantee along with a commercial mortgage. The guarantee ensures that the lender can extract the outstanding dues from you, if the sale proceeds fail to provide for the entire debt amount.

Published by

Andy

Andrew Sabo is the owner of TOP 10 Funding. TOP 10 Funding currently represents over 100 private lenders and we are constantly vetting new sources. We have access to Billions of dollars to lend for investment properties, fix-and-flips, commercial projects, such as shopping centers, multifamily, assisted living, and office building purchases and refinance, new developments and commercial construction loans in most cities in the US. We have great relationships with DIRECT private commercial lenders. There are no up-front broker fees and the application process is simple and fast. An executive summary and a short intake form will get you an answer in a few days. Phone: (808) 375-4845 Email: info@top10funding.com Website: andysabo.com LinkedIn: linkedin.com/in/andrewsabo Twitter: @ndysabo

2 thoughts on “Specifics of commercial mortgages from private lenders”

  1. In most cases..I wouldn’t blame the bororwer. The real estate market has gone mad the past 10 years.. average homes values have gone from $100k to $300k. The average person wants to own a home.. and are pressured to get in while the price is almost realistic. The lenders used to require blood and your first child to get qualified, but have relaxed so much..in some cases people are getting homes without inspections. At the same time, mortgage companies have become a dime a dozen trying to make a quick buck off anyone that walks in their door. They local mortgage companies are, in some cases, fudging the applicants application so they qualify from the lender.. its very easy.The only person that would benefit from an interest only, adjustable mortgage is the lender.. they shouldn’t be legal.

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