L/O Commercial Property
I am interested in making an l/o offer on a commercial unit in my area and then excercising the option "within" 1 year. However, I have a few questions.
1. When making the initial downpayment and all monthly payments to the owner is it possible for the monies to be applied toward the downpayment at the end of the buyout term? The asking price is over $100K so I will seek bank financing which may require 20% down. I would much rather have my payments applied toward the monies down than the principle. Would this fly with the bank if it stated in the contract?
I just had a thought it may not matter how it is applied because I would still have close to 20% in equity if the monies are applied to the principle or downpayment. Correct? Incorrect?
Bump!
If all or part of your option consideration is to be applied toward the down payment ( at the time you exercise your option--if you do) then you might want to open an escrow and place this portion of the money in escrow to show the bank at purchase time. You can give instructions to the escrow agent to turn the money over to the seller if you decide not to exercise the option.
An alternative might be to write a separate check for the component that is to be applied to down payment and then show the bank your cancelled checks. You might want to check with the lender in advance to be sure of no surprises when you purchase.
Write up 2 contracts with the seller and work with a mortgage broker to have them financed by different lenders and do a simultaneous closeing !
there are a few lenders that do not limit the number of properties held but usually the rates are not as good.
Countrywide has a limit of 4 loans that they will allow for a single borrower. They have been known to waive the condition. You want to have separate loans on each condo, so you can sell them one at a time without having to get a release on one property.
There are some lenders that place a limit on the total number of loans that you have. This comes up from time to time on TCI.
ahimon what does simultaneous closing mean ? would I be paying closing 2 times ? or just once ??
edmeyer - thanks for the advice on release document for each property at time of selling - don;t think of that at all... but to save the closing cost - I would like to bundle all into 1 - how difficult is it to get a release and whom do we get that from ? I assume the lender..
~thanks
You need to check on what you might be saving. Your loan origination fees are often proportional to the amount of the loan and since the whole is equal to the sum of its part-- this is a wash. These used to be called "blanket mortgages" where there is one loan secured by more than one property. I have been told that lending institutions charge more for these, so you need to check this also. Another issue is that you may need to pay for appraisal fees at the time of release since the bank will want to be sure that the remaining properties are adequate security for the remaining portion of the loan.
I hope this is of some help.
Regards,
Ed
I am a mortgage broker. I would recommend going to a broker. Finance them all separate. Tell the broker ..I am giving you 5 loans, you get paid from the lender on all of them , so I want no closing costs , except possible on 1 of them. They can use a portion of what the lender pays them to credit back to the client for closing costs.
You basically tell them you have 5 loans for them and this is the way we are going to do it?
Also, as far as I have found , you can own 19 properties. Typically 4 at each lender. If later down the road you decide on keeping all these units for a while, then refi and do a blanket loan, go back to the same broker