Commercial Property Loan Interest Rates | Factors That Go Into Commercial Loan Interest
Commercial property loan interest rates are affected by much more than the market. While the fed may set interest rates in a general sense, lenders are looking at risk, and interest rates represent the risk associated with investing in your property.
If you’re hoping to get the best rate, it’s important to know in advance what affects the rates and – by association – what you can do to lower your rate as best you can.
Factors That Affect Interest
- LTV – Loan to Value Ratio
More than anything, the loan to value ratio, or LTV, is crucial for these types of loans. LTV refers to the amount the loan covers of the total value of the property. At minimum, you must have paid off at least 20% of the property’s value, and in many cases you’ll need to pay at least 25% or more. The more you pay off, the more likely your rate will go down.
- Credit Score and Financials
Of course, lenders will be looking at your finances as well when they decide on commercial property loan interest rates, as they’ll be trying to find whether or not you’re considered a risky investor. Before you ever apply for your loan, it’s in your best interest to check your credit, avoid getting any new debts, and try your best to raise your score and show proof of income/revenue. If lenders are confident in you, they’ll offer lower loans.
- Property Revenue
You’ll also want to prove the property’s revenue. Unlike a single family home, commercial property loan interest rates are affected by how many people are renting the property, if they’re on lease, and whether or not you can prove that the property will continue to be profitable. Many lenders even request photos so that they can see if the property “looks” like it will maintain itself. Proving that the property will generate steady revenue to pay off the loan is crucial.
Getting the Best Interest Rate
At CRE Lender, we know how important excellent commercial property interest rates are to your profit and your happiness. That’s why we are the number one source of information on funding a commercial loan in the United States. We can connect you to lenders and/or brokers that offer the best possible rates, and find you ways to get through the process so that you’re able to complete your loan faster.
Sign up with CRE Lender today to find out more.
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