Financing and purchasing apartment buildings by taking out mortgage loans
May 5th, 2011Taking out an apartment loan is considered as one of the easiest way of financing a commercial property among other investment properties. Apartment mortgage loans are not much similar to the conventional mortgage loans that one takes out for buying a normal house. Usually those properties with more than 4 units are known as apartments and these are commercial properties with their own underwriting and funding rules and regulations. The ace mortgage loan lending organization Fannie Mae supplies a number of apartment mortgage loans. Just like taking out a traditional mortgage loan, a borrower must consider ‘how much house can I afford’ before taking out the mortgage loan. Read on to know more on apartment mortgage loans.
Are there any similarity between apartment mortgage loans and normal home loans?
The apartment mortgage loans and the normal mortgage loans share some particular things in common. Check them out.
* Up to 80% of the property’s value can be financed like normal home loans.
* You can take out an apartment mortgage loan with 30 year repayment term. The terms usually vary from 5-25 years.
* You need an exceptionally good credit score for taking out an apartment mortgage loan, like the normal home loan.
* If you suddenly fall back on your monthly mortgage loan payments, you can even take out a home equity loan or a second mortgage against your apartment building.
* The mortgage loan will have your property taken as the collateral.
What makes apartment loans different from normal home loans?
Though it is a fact that the apartment loans are secured by pledging the apartment building as collateral, yet they are more like commercial loans than normal home loans. Check out some ways in which the apartment loans differ from your home mortgage loans.
* You may get the benefit of lender recourse and therefore all your personal items will not be at risk in the event of a default.
* The loan origination fees can be staggeringly high. Sometimes the fees may even range from $4500 to $7500.
* If you prepay the loan, you may be subject to high pre payment costs like 20% of the loan balance. If you are keen on avoiding the penalty while selling off the property, you may even substitute a similar property as collateral but keep the loan against the property.
* You can take out apartment mortgage loans from corporations, trusts, partnerships and LLCs.
Thus, if you’re confused about the striking differences between the home loans and the apartment mortgage loan, consider the differences and the similarities mentioned above. Don’t forget to consider ‘how much house can I afford’ before deciding on the loan amount.