Hello,
I am trying to find commercial lenders who will lend above 80% LTV with a decent rate? Does it exist? 90% LTV?
Thanks,
Dan
Hi Dan,
Yes, you can get over 80% LTV, however, when you do that you have to realize that lenders are going to be very exacting on what they will and will not require and the rates that go with it. It is a matter of risk factoring. 90% financing on commercial loans is available but when doing your numbers you must look at what that 90% financing is going to cost you in the long run. It may be great for the downpayment portion but when you look at the rate and payments that go with it you’ll have to decide whether or not the monthly costs is worth it. Good luck.
marc
I agree with the above post- 90% is available out there, but the underwriting requirements are strict (perfect credit, etc) and the rates are high- it is unlikely the rate will be below 10%.
Not likely. If a lender offers 90% (one loan) rates are going to be at or above 10%.
If you go with an 80/10/10 combo (1st and 2nd) you would be looking at 10 Year Treasury + 1.50% (or about 6.65%) on the first and 12.750% on the second…The catch is that the min. loan amount on the first is 2 million and the min loan amount on the 2nd is $250K.
In both cases you will need strong credit and assets.
EEM,
What commercial lenders are you using that are offering rates like that. I have looked around and have not had any luck finding rates like that. Any information you could provide would be great.
It’s conduit.
What is “conduit”? I have been researching small balance commercial?
It’s the same as a CMBS (commercial baced security) the loan is securitized shortly after closing and sold directly to the market/investor.
Most of the time rates offered by conduit lenders are much lower than those offered by traditional commercial lenders.
Drawbacks are: higher closing costs. Impounds (Taxes, Ins., tenant improvements, Leasing commissions, etc). Lock outs followed by Defeasance or yield maint.
Smallest conduit program I have ever seen is 500K…and they don’t really want to do it with a loan amount that low, but they will.
okay gotcha. thank you so much for the info. i learn something new every day. ;D
No problem.
Conduit is hot. ;D
It’s fun to quote someone conduit rates when another broker is quoting silverhill or met-west, etc. :grinyes:
stay away from conduit…its a nightmare and they usually want $15,000 up front.
Fees are higher on conduit loans and the loan process is not for the faint of heart, but for a borrower who has a loan amount over 2million the rate difference is no joke.
Would you want to pay even .5% more than you had to on a loan amount of $5 million?
The only time conduit is worth doing is when you client plans to hold onto the property for at least 10 years and understands how costly the defeasance or yield maintenance prepayment penalties are. Its rarely worth saving .5%
Well if your going to defease…lol…you might as well hang it up.
I’ve never done a conduit loan for anyone who did not have a portfolio of commercial properties and did not intend to hold onto them.
I’ll agree that if someone is not intending on holding the property long term conduit would not make much sense. There are some agressive portfolio products out there.
I’m just now learning the life insurance ropes. I still have yet to see what’s so attractive about them…maybe I just have not found the right company.
really the only thing attractive is the rate and if you think about it, you could take that $15,000 that they charge in closing costs and pay discount points to buy down the rate from a regular commercial lender.
Oh and conduits are non-recourse as well so thats attractive to some people. There are plenty of conduit lenders tho so people are using them and they must be doing something to stay in business. I usually tell people to run the other way tho.
what is “defeasance”?
I’ve seen a few conduits that probably won’t be around to much longer and a fee that offer real value…column financial being one of them.
For instance: I recently closed a retail refi. where the portfolio lender was offering a rate of 7% on a 10 year arm amortized over 30 with a bullet in the 15th year. Column offered 6.575% amortized over 30 with a 10 year bullet. Columns fees were only 6k more. The client did not like the idea of an adjusting rate after year 10 and did like the over 200/month savings with the conduit. The additional closing costs will be paid off in the next 24 months…after that the borrower will save over $20,000 before year 10.
instead of having a fixed pre-payment penalty the borrower must replace the “cash flow” the investor would recieve by paying what it will cost to buy enough bonds to replace the cash flow. It’s expensive…third party fees are often in excess of 50k not to mention the purchase price of the bonds (if bond prices have risen since securitization of mortgage)…if bond prices have droped signifigantly since the securitization of the mortgage there is the posibily of a “discount” on the principal balance refund…in other words it could in theory work out for the borrower.
Check out “defeasance calculators” in google.
Man that is some complicated stuff. How long have you been doing commercial loans?