Traditional Commercial Mortgage

Most banks and other lenders provide commercial real estate loans for a variety of properties, including office buildings, industrial buildings, multi- family units and retail centers. Like a residential mortgage, the commercial loan will be secured by the property being purchased. Beyond that, terms vary widely depending on the lender. Some banks will make fully amortized loans with long terms up to 25 years and loan-to-value ratios up to 80%. Other banks may have interest-only loans with terms of 10 years and loan- to-value ratios of 65%. Generally, though, it’s harder to qualify for a traditional mortgage than other types of commercial real estate loans. Banks want to see borrowers with good personal credit, a strong business and a low debt service coverage ratio. Interest rates are usually within a few percentage points of a prime rate, such as the Wall Street Journal (WSJ) Prime Rate.