Is It Right For Me?
If people want to grow their business, loans for office buildings might be right for them. Some of the scenarios that make these loans perfect to obtain include the following.
• Developing office buildings for commercial use
• Investing in commercial properties
• Purchasing office space or buildings to do business
• Extending a current work space
Eligible Property Types
Class C, B and A urban and suburban office buildings and medical and professional office buildings are eligible for this type of financing. Aside from that, single tenant office buildings that have long term leases and are located in strong markets are also eligible for these loan programs.
Debt Service Coverage Ratio
Loans for office buildings have a minimum DSCR of 1.25:1. Asset qualities such as tenant mix, physical condition, age and competitive market position are important considerations in determining the DSCR that is applicable.
How It Works
Usually, office building financing will allow for a 20 year, 15 year or 30-year repayment term with either a variable or fixed interest rate. Even though fixed rate loans are very popular, a variable rate keeps the payments much lower. Additionally, some office building loans allow the use of government financing and other third party assistance.
The resources that are allowed depend on the kind of business run in the office being financed. The ratio of the loan is usually assessed at 60 to 75 percent, and it can be up to 90 percent for SBA loans as long as the office is more than 50 percent owner occupied. In many cases, a number of options are available for prepayment terms should the owner deem it necessary. This is especially beneficial if they want to save on interest over the life of the loan.
With an office building loan, the borrower will usually contribute monthly to an escrow account for property insurance and real estate taxes. They will also create a rollover monthly reserve escrow for expenses involved with leasing commissions and tenant improvements along with a monthly escrow reserve that is equal to the amount needed for site inspections and engineering reports.
• Monthly Interest-only Payments
Loan designed for office buildings consist of two steps. The first step will pay for the construction, acquisition, or refinancing of the office building. The money is withdrawn on as as-needed basis, and interest-only payments are made to the lender.
After the project is complete, the loan’s balance becomes payable. Another loan for office buildings is taken out in order to pay for the balance of the first loan. The advantage for the loan borrower is that they can make lower payments during the office building’s construction.
• Set Interest Rate
Another advantage is that this type of loan has a set interest rate. This is because the same lender is used for the permanent parts of the loan and the building’s construction. It offers interest-only payments during the construction of the office building. Once the construction has finished, it modifies to a permanent loan automatically.
The lending company can offer a set interest due to the assurance that the client will continue to utilize their mortgage service. The advantage is that the borrower keeps the same interest rate both parts of the loan rather than risking that it will increase between the beginning of building and its completion.
• No Initial Payments
Unlike other loans, there are no initial payments on loans for office buildings. People will not have to make any payments during the construction period. This is because it automatically transitions to a permanent loan. The permanent loan will finance the interest payments.
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Rates & Terms
• Loans from $20,000 to $10,000,000+
• Rates: starting at 5%
• Term: 12-60 months (flexible)
• Quick Closing: within 1 day
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• Multi-family & Mixed Use
• Senior Housing
• Office/Medical Office
• Mobile Home Parks
• Storage Facilities
• Hotels, Resorts, Casinos
• Parking garages
• And More!