Exit Commercial Hard Money Loans

If you are now in a commercial hard money loan, and your business occupies at least 51% of your building and your loan amount is less than $2,000,000 I have very good news for you. You hit three of the biggest guidelines of being eligible to refinance your current commercial hard money loan with a government sponsored program. And a loan that will save you thousands of dollars per month. As in most aspects of the commercial mortgage business knowing which sources are still funding is key.

Currently these government sponsored loans are still viable, if you work with banks or lenders that are set up as portfolio lenders. Meaning that they will hold onto your loan for the long term, rather than just selling it on the commercial secondary market. Again, it’s imperative to stick with sources that will hold onto the debt. Otherwise your loan request stands very little chance of closing due to the general credit crisis and more specifically the issues on the secondary market.

As far as the program, borrowers can expect interest rate at around Prime plus 2 -3% with 25 to 30 year amortization schedules. Most programs are quarterly adjustable, though there are a few sources that are still offering 5 year fixed loans. Loan to value restriction are aggressive at 85% and sometime 90%. SO borrower can often refinance out of their hard money loan, cut their interest rates in HALF (most hard money rates are 14 -16% and their new rate would be appr 6 – 7% {Prime is currently at 4%}) and get additional cash for business expansion, working capital, etc.

Also, as far as getting the loan closed, the debt coverage ratio which is one of the biggest “killers” of commercial loan requests is normally set at an aggressive 1:2 with the ability to use projection to supplement weak existing cash flow… This alone is a huge benefit to borrowers that have a struggling business or business that is in a turnaround situation. This point can’t be over stated.

Again, knowing which banks are set up as portfolio lenders and which are still closing loans is paramount in getting commercial loans closed in this credit crisis. Though difficult to find, this is what will separate a closed loan from 3 months of wasted time and more heartache.

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