This Commercial Mortgage Lender Shares Hidden Financing Secrets
The Hidden Secrets of Commercial Financing
One of the key secrets in commercial mortgage lending is the importance of understanding loan-to-value (LTV) ratios. LTV is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. For commercial properties, lenders typically offer loans with LTV ratios ranging from 65% to 80%1. Knowing how to negotiate a favorable LTV can significantly impact your financing costs and equity requirements.
Another lesser-known aspect is the role of debt service coverage ratio (DSCR). This ratio measures a property's ability to cover its debt obligations with its net operating income. Lenders often look for a DSCR of at least 1.252, meaning the property generates 25% more income than the required debt payments. Understanding and optimizing your DSCR can improve your chances of securing favorable loan terms.