Commercial Equity Line Vs Fixed Rate Commercial Second Lien Position Loan

Lots of owners in the commercial actual estate industry are unaware that a second lien position loan exists, and specifically in this rough marketplace. But yes, for the ideal scenario borrowers can still secure these second lien position loans. These programs are geared towards smaller projects though with real estate values less than $three,000,000. Loan amounts on the commercial line or commercial second mortgages are capped at $500,000.

Each programs can be used by either investors or company owners, though the loan requests are a lot easier to fund for company owners (simply because there are no property distinct Debt Coverage Ratio's to contend with).

As far as which loan program is a greater selection, we in general suggest the fixed rate program. First of all the rate is fixed in between 5, 10 or even 15 years. This security of understanding the interest rate will not move is useful in this uncertain market place. With inflation looming, it appears particular that the fed will soon start off bumping up rates again, which will put a number of borrowers in floating loan programs in painful positions.

Also, the rate on the commercial second mortgage is frequently suitable on par or only slightly higher than with the line - with the security of becoming fixed. For example, as of this writing 7/08, the rate on the line of a $500,000 loan amount is at around Prime plus 1.five% or 6.5%. Even though the five year fixed, 30 year amortization loan rate is at 6.9%.

In addition, underwriting is sometimes a small less difficult with the commercial second mortgage than with the commercial line of credit.

The main benefit of the commercial equity line of credit is having capital, on the market and ready. Like a property equity line, the borrower does not pay interest on the line unless dollars is pulled out and employed. Usually borrowers that want the line use it to recapitalize a company, rehab or renovate an additional property or use the money out of the line as the down stroke on the buy of yet another property.