Most commercial property loans today are fashioned by commercial banks. Real estate is only considered a “commercial property” when it\’s other than a condo, a duplex, a triplex, or possibly a fourplex. Surprisingly, it doesn’t matter regardless of if the property in question is if it\’s owner-occupied. As an illustration, a loan on a non-owner-occupied duplex is still considered a residential loan because Fannie Mae and Freddie Mac tends to buy loans secured by non-owner-occupied duplexes.
Because commercial property loans are not sold to Fannie Mae or Freddie Mac, they can be fairly illiquid assets. In other words, when a lender gives a commercial property loan on a building, the lender is pretty much stayed with that loan in its portfolio for your term of the loan. If ever the lender all of a sudden needs liquidity in order to meet higher than expected withdrawals, a bank cannot easily unload an office building loan for cash.
As the result of this illiquidity, commercial property loans are generally a little more expensive than normal mortgage loans. How considerably more expensive? Their usually around 0.75% to 1.50% higher. Therefore it is not to your advantage to be a borrower to have your property deemed commercial property. However, interest levels on every form of mortgage loans today tend to be 30-year lows, so even commercial property loans today will set you back deliciously low rates. Nevertheless, residential completely stand out from the standards of commercial mortgage rates.
Commercial property loans include apartment building of 5+ units, offices, strip centers, shopping centers, industrial buildings and warehouses, restaurants, bars, special use properties, and also raw land.
A loan on the five-unit apartment building will usually come from a commercial property lender, while such a property is more precisely known as a multi-family property or a residential income property. In other words, all multi-dwelling loans are viewed to be commercial property loans, yet not all commercial property loans are multi-dwelling loans. Commercial property loans could be the larger set.
What if the property includes a single apartment unit more than a storefront? Is this a residential property or a commercial property? After all, there is only one living unit. These types of property is known as a mixed use property. A combined use property is considered to be commercial, and you would need a commercial real estate lender for the loan on such a property.\”
Commercial property loans are equally one form of commercial financing. Other forms of business financing include accounts receivable financing, inventory loans, equipment loans, asset-backed credit and unsecured business loans.
Throughout the industry of commercial real estate finance you will see the phrase, “commercial”. Commercial is just another word for “company”. You\’ll see the term, “commercial lender”. A poster bank is just a garden variety bank that is definitely in the business of accepting deposits and making loans, instead of an investment bank or a merchant bank (a very rare style of bank that actually invests in companies and ventures versus making loans).