What is your opinion - Commercial loan terms

Question

Hi Guys,

pulling cash out of 2 sfr, Local bank is offering 6-6.25% loan, 20 years @ 5 year fixed, adjusts every 5 years..

What is your opinion on what ive been offered?

is it standard / expensive?

thanks

Eric Johnson · Answer

@Jonathan Bren It totally depends on what your needs are. You can really only go to a local bank or credit union if your income and DTI supports the loan requests as they calculate global borrower financials (I know this because this is what I do for a living). However, if they're only using the asset to qualify and not looking at personal income. I think 6.50% is accurate pricing, especially in today's market. However, I do 30 year amortizations and 10 yr fixed term... 20 year am sounds a bit short.

Jonathan B. · Answer

Thanks,

I PMd you Eric

Scott Rauch · Answer

@Jonathan Bren

I’m in the process of getting a 20 year loan for a duplex. I’m doing it as a BRRRR. I went to a local bank and their offer was 20 year loan. 1st 5 years interest rate fixed at 4.75%. Then next 5 years it would reset and interest rate would be what the FHLB is plus 3% for the next 5 years. Then reset for the next 5 years, etc, etc... If the interest rate increase over the life of the loan and we don’t make any extra payments to the loan then we would have to pay a payment at the end of the 20 year loan. My monthly payment and interest is set at the 4.75% for the length of the loan but would pay at the end.  Not knowing what the ballon payment at the end will be interesting. But I expect interest rates to remain low for awhile. LTV is 80%. Hope this helps!

Jaysen Medhurst · Answer

Title would be under a LLC, @Jonathan Bren. Personal guarantees on the mortgage.

Jonathan B. · Answer

great, is that under an LLC or your personal name?

Jaysen Medhurst · Answer

No thanks, @Jonathan Bren. I'm seeing rates in the 4s. 20-year term with the rate adjustment is pretty standard on commercial mortgages. Talk with some local CUs. One near us recently quoted 4.75%, 30-year amortization, 15-year term, 5-year rate adjustments.

What is your opinion - Commercial loan terms

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