Financing Residential Vs Commercial Real Estate
What is the difference in financing cost between a 4plex (treated as a non commercial prop) and a building with more than 4 units (that is considered a commercial property)?
huge.. a 4-plex can get a 97% FHA loan if 1 unit is OO, nothing like that is available for 5+
A single family dwelling, a four-plex, and a 100 unit apartment complex are all residential properties.
A distinction among them is made in the financing vehicles that are available to a buyer. All these properties can be financed with a commercial LOAN, but only properties with 4 or fewer dwelling units can be financed with a consumer residential mortgage loan.
Commercial loans are generally amortized over 15 years, require 20% to 30% downpayment, and the property must generate enougn income to cover at least 120% of the debt service, and, the loan will have a five year balloon (perhaps even shorter).
Commercial loans generally have no limit on the number of financed properties you can own.
The interest rate charged could be fixed or variable, and is usually keyed to the prime rate.
Consumer residential loan programs are available up to 97% financing. Amortization periods as long as 40 years are available, but 15 year, 20 year, and 30 year amotizations are the most common. As a general rule, the loans do not have a balloon. Interest rates for fixed rate loans are most commonly tied to the 10 year Treasury. The index for adjustable rate loans varies, with LIBOR, COFI, and the one year Treasury being among the most common. Today, many lenders will not give you a loan to purchase an investment property if you already have four mortgaged properties on your credit report.[ Edited by NewKidInTown3 on Date 01/23/2009 ]
NewKid:
Do you know a ballpark interest on the Commercial Loan? Like about much diffrence are they from the residentail Loan?
As an example, my investment homes in a Residential Loans, are about 1% more than my homestead. Do you know of the ballpark figure of the interest for the Commercial Loan compared to your Homestead?
Thanks
Hi Guys.... anyone ??
If this is not the right place to ask, can you please help and point me in the right direction?
Thanks