What are Commercial Real Estate Loan Rates?

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Mortgage and Lending with Level 4 Funding NMLS 1018071 AZMB 0923961

If you are considering a commercial real estate purchase then you need to investigate commercial real estate loan rates. In addition you need to understand what can cause those rates to vary.

Over the course of 2017, the average commercial real estate loan rates have been between 5% and 6%. But that is not a number that you should base your estimates and calculation on if you are seeking a loan. There are many factors that can have an impact on the interest rate that you will be paying on your loan. Learning about these factors can offer you the opportunity to change some and at least expect the others.

The type of loan that you select will have an impact on the commercial real estate loan rates that you will be paying. The SBA 504 loan is currently offering one of the best interest rates at 4.1% to 4.4% and these will normally finance up to 90% of the property value. Fannie Mae and Freddie Mac loans are in the 3% to 5% range but this type of loan is only going to finance somewhere between 70% and 80% of the property cost. Traditional banks are offering rates that range from a low 3.5% up to 8% but with these rates comes the drawback of only covering around three quarters of the value of the property. Short term bridge loan interest rates are in the 9% to 13% range and the highest rates can be found, as expected on hard money loans and they are in excess of 10% and some are even reaching 20%.

What you can Control

You do have some control over the type of loan that you select but you are really forced to take the commercial real estate loan rates that are associated with that type. But there are other ways that you can have an impact on the rate that you will pay for a commercial loan. The first factor that you control is your credit score. Having a credit score of 650 to 700 will get you considered for a commercial loan but you will definitely not be getting the best possible interest rate. A score of 700 to 750 is most likely going to get you the loan that you want. But a score of 800 is going to get you the best rates that the lender can offer. So while you are mulling over commercial real estate loan rates, spend some time checking your credit score as well.

Make Yourself a Model Borrower

Investing some time to learn each lenders qualification criteria can also be helpful. Knowing the factors that are most important to each lender can allow you to tailor your application to meet those specific desires. If a local bank favors higher cash flow, then reduce spending and follow up on past due accounts to increase revenue. Some lenders might prefer that you act as a personal guarantor for the loan to get a better rate. Be certain that your personal financial affairs are in order and can allow you to take advantage of that factor. Look at getting a commercial loan like you would any other good or service and spend the time to shop for the best rate that you can find.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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Nov 10, 2017 06:53 PM #1
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