Consider Loan To Value Ratios when Financing Commercial Real Estate img

Consider Loan To Value Ratios when Financing Commercial Real Estate

calender icon 8/7/2023    poster icon  Mark Goodman

When it comes to purchase financing or refinancing for commercial real estate, it is important that borrowers keep an eye on the LTV, or loan-to-value ratio, of the subject property to avoid unpleasant surprises at the time of origination. Imagine, for instance, that you own a property you assume is worth $5 million, and you’d like to refinance at an 80% LTV, providing you $4 million to pay off any existing loans and perhaps cash-out above and beyond the outstanding balance. However, when you sit down with your lender, they assess that your property is worth just $4.3 million, and they are only comfortable with a 70% LTV for a loan amount of $3,010,000, nearly $1 million less than you’d planned.  If you’re looking at an outstanding loan balance on the property of $3.5 million, you could be in a situation where you’d need to bring cash to close rather than cashing out.

Commercial Partners Title

At Commercial Partners Title, we provide a full range of real estate services to clients throughout the state of Minnesota and across the United States. We have decades of experience working on all types of commercial transactions. Let us put our experience to work on your transaction. We will walk you through the entire process and make sure you fully understand each and every step. Contact us today to learn more about our services.