• Preston Morris

How to Get a Commercial Real Estate Loan: What Do Lenders


What kind of loan can I get for commercial property? The kind of loans include variable rate loans, fixed interest loans and lines of credit. These loans can be paid on an interest only or principle and interest basis.


What is a commercial home loan?

A commercial real estate loan is a mortgage secured by a lien on commercial property as opposed to residential property. Commercial real estate (CRE) refers to any income-producing real estate that is used for business purposes; for example, offices, retail, hotels, and apartments. Click Here for more details Please!


Commercial real estate loans explained

Similar to taking out a home mortgage, you can also take out a mortgage when buying commercial property. Commercial real estate lending helps business owners finance the purchase or renovation of commercial property, such as:


  • Office buildings

  • Retail or shopping centers

  • Apartment buildings

  • Hotels

  • Restaurants

  • Industrial buildings


Most commercial real estate loans require the property to be owner-occupied — meaning the business needs to physically reside in at least 51% of the building. If the property won’t be majority owner-occupied, borrowers may have to look for an investment property loan instead.


Terms and rates can vary by the lender and property being financed (see our guide on average commercial real estate loan rates for a better idea). Interest rates may be fixed or variable, and down payments on commercial properties typically range from 10% to 30%, with repayment terms as short as five years and as long as 25. Some loans are fully amortized — each monthly payment will be the same until the loan is paid off — whereas others might have interest-only payments with a final balloon payment at the end of the term.


pros

  • Rental income and investment history can qualify you

  • Shorter terms

  • Fast closings and simpler application processes

  • More room for negotiation

cons

  • Higher interest rates

  • Higher down payments and closing costs

  • Not available to new investors

The bottom line

If you’ve been around the real estate investing block a few times, a commercial residential real estate loan, bridge loan, or hard money loan could be a good way to finance your project.

Don't have the experience needed for one of these loans? You have options, too. Consider an investment property loan or a government-backed mortgage to get your first investment off the ground.

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