Average Commercial Loan Rates Versus Residential Loan Rates

There are two types of loans, which are commercial and residential. You should know it because the type of loan you choose determines the average loan rate.

Indeed, the average commercial loan rates are different compared to the average residential loan rates. You can also use the knowledge to find the cheapest car insurance rates. 

What a Commercial Real Estate Loan Is 

A commercial real estate loan means a loan for purchasing, constructing, or refinancing a non-owner-occupied property. The types of properties include office buildings, medical facilities, warehouses, hotels, and rental buildings.

Lenders determine the loan rates based on the income from the properties and expenses of the property. For example, they will see the profit you earn from renting the property.

What a Residential Real Estate Loan Is 

Just like the name of the loan, a borrower uses the money to buy a property for a living. Because of that, lenders rely on the financial condition of the borrower in approving the request and determining the average loan rates. The repayment period of a residential real estate loan is longer than a loan for commercial real estate.  

Average Commercial Loan Rates vs Average Residential Loan Rates 

The average commercial loan rates vary from 3.5% to 5%. Lenders will also check your credit score before borrowing money for commercial real estate. Nowadays, a borrower should have at least a 680 credit score to get commercial financing. 

How about if you want to lend money for buying a home? The average residential loan rates are from 2.5% to 3.9%. You are also about to pay a fixed rate in a variety of periods from 10 years up to 30 years.

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The Way to Get a Commercial Real Estate Loan 

You should know the way to get a commercial real estate loan after learning the average commercial loan rates. First, you have to assess the commercial property’s financials. In this case, lenders will review your credit history, financials, and even assets.

Second, you should determine the type of commercial loan you want to use to buy a commercial property. The better your credit profile and finances, the easier for you to work with a bank. 

Third, complete a commercial real estate loan application. Ensure that you complete the documentation, including a personal financial statement, balance sheet, historical income and expenses, and others. 

Fourth, wait for the approval. Lenders will approve your request if the property can support your debt service in the ratio of 1.2 to 1. Fifth, finish the commercial loan, along with the interest rate. That’s why you should find the best average commercial loan rates before borrowing money.    

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