How much will I need for a commercial down payment?
If you’re currently pursuing a commercial real estate loan, you’re likely wondering what you’ll need to provide in terms of an initial commercial down payment.
Like residential home loans and auto loans, commercial loans generally require the buyer to provide a down payment to cover part of the cost of sale before the loan is granted. This down payment is designed to show the lender that you’re willing to take some of the risk upon yourself, and that you’re serious enough about achieving enough success to gain return on your investment that the lender can expect to receive their loan amount with interest down the road.
Generally, commercial real estate down payment terms require deposits that can range anywhere from 20% to 40% or more of the total property value. Conventional business loans often require a 25% down payment, while private commercial lenders will occasionally offer down payment requirements as low as 10 to 15%. (It should be noted that loans such as these are rare.)
Keep in mind that the down payment requirements can also vary depending on the credit situation between you and your business, the terms of the loan, and the lender itself, as well as other factors like current market trends and the type of property. In general, commercial property down payment requirements can differ greatly from residential loan requirements when it comes to down payments.
You’re in control of your commercial down payment
Remember that the minimum down payment for a commercial property doesn’t preclude you from submitting a larger down-payment amount in order to lower the amount of interest you’ll accrue over the life of the loan. You’ll need to make determinations based on your own unique situation and decide the best course of action for your business when assessing your commercial real estate down payment.
Your best bet is to consult a skilled and experienced commercial down payment expert from a trusted commercial lending company. A down payment is a massive commitment, so you’ll want to ensure that you’ve received all the information you need to make an informed decision moving forward. Don’t leave anything to chance.
What determines the deposit required for commercial property?
Commercial mortgage financing is built around a LTV (loan to value) percentage, which is how much of the property’s value a lender is willing to loan. That number is determined by a range of factors, bust mostly it’s up to the lender based on their willingness to accept risk. At Clopton Capital, we can offer loan to value maximums up to 80%, which means buyers will need at least a 20% deposit
Have more questions about commercial loan mortgages or commercial mortgage financing? At Clopton Capital, we bring decades of commercial lending experience to our work with businesses and individuals across all industries. We’re enthusiastic about ensuring that you understand ever element of your loan terms and helping you find the best possible arrangement for your unique business and needs. Contact Clopton Capital today to learn more.