Apartment Loans

We recently began work on securing commercial mortgages for two different apartment complexes. When deciding to refinance or purchase an apartment, you’ll face a few decisions. First, borrowers need to decide whether to use conventional financing or some form of hard money. The typical considerations that factor into this decision involve the timing of the required funds, the borrower’s credit, and the loan to value ratio.

Hard money lenders and private lending are able to move with relative speed. Depending upon the fact and circumstances of the apartment loan, we have been able to secure financing and close within a few days for commercial hard money. In the current market, this may be desirable to commercial apartment owners due to an impending balloon payment or due to the difficulty in obtaining conventional commercial financing.

Another factor to consider is the borrowers credit. Over the past several months as a result of the chaos in the residential lending environment, commercial lenders have raised minimum credit scores as part of their underwriting criteria. This has created an unusual demand for commercial hard money. We expect the demand for commercial hard money to continue through 2008.

In circumstances where the credit score fails to meet conventional underwriting guidelines, the underlying property value is crucial to locating capital sources. Hard money lenders, like conventional lenders, have standards for their loan to value (LTV) ratios. LTV ratios are typically lower than conventional sources. Not surprisingly, this is due to the increased risk assumed by a hard money lender.

Fortunately, apartment complexes are considered good risks in the present market. Their values are readily established by market comparables, by comparing current rents with market rents, and by independent appraisal. As a result, apartments are great candidiates for both conventional and hard money loans. In addition, apartments have better liquidity as collateral than many other commercial properties.

At Spectracom, we are only commercial mortgage brokers. As a result, we have a variety of apartment lenders through which we secure commercial loans. If you have a need to finance or refinance an apartment complex, please give us a call.