Real estate investors use mixed-use loans to finance buildings that are used for a combined purpose. Mixed-use buildings are zoned for multiple uses, including residential, commercial, industrial, or institutional. Mixed-use loans can be short-term or long-term, with terms ranging between six months and 30 years. Any building with at least two units of different zoning…
The loan-to-cost (LTC) ratio is the relative comparison between the loan amount of a commercial mortgage and the total cost of a rehabilitation or construction project. The LTC ratio helps investors determine the riskiness of commercial real estate investments. It’s used primarily for two types of commercial mortgages: rehabilitation loans and construction loans. The higher…
The after repair value (ARV) is the estimated value of a property after repairs and renovations are completed. It allows investors to determine a potential investment’s sales price, repair budget, and profitability. It is used when long-term investors estimate the long-term rental value of a property and when fix-and-flip investors buy, rehab, and sell properties…
The loan-to-value (LTV) ratio compares the size of a loan relative to the value of the property being financed. Regardless of what type of loan you apply for, a lender will calculate the LTV ratio as part of the approval process. The maximum LTV ratio varies depending on the loan type and borrower qualifications. For…
A portfolio loan is a mortgage loan that is held by the mortgaging company and not sold on the secondary market to the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Portfolio loans help small business owners who cannot qualify for a traditional mortgage loan or who want…
A hard money loan is mortgage financing for businesses that cannot get funding from other traditional lenders, either due to credit issues or properties in disrepair. These loans are considered a last resort in mortgage financing due to higher interest rates and fees. Traditional lenders usually have better rates for longer terms, while hard money…
Portfolio loans are mortgage loans that aren’t sold to Fannie Mae or Freddie Mac on the secondary market. Small business owners that cannot qualify for a traditional mortgage or want to finance multiple properties with a single mortgage can turn to portfolio lenders for financing. Because portfolio lenders don’t have to use federal guidelines in…
Investment property loans are often found through online mortgage providers, investor-only lenders, and larger banks. Investment mortgages typically range from $75,000 to more than $2 million, requiring a minimum down payment as high as 25%. These rental property loans often have higher interest rates than conventional mortgages due to the perceived risk that the borrower…
