The Difference Between Loan Terms and Amortization

Understand the difference between loan terms and the amortization period to navigate the complexities associated with CRE loans.

Commercial real estate loans often present more unique situations than residential loans, and therefore require innovative options when it comes to loan terms. Understanding the general principles of loan terms and how they differ from the amortization period can be helpful in navigating the complexities of commercial real estate loans.

Loan Terms

When approved for a loan, a borrower is agreeing to repay the principal balance within a certain timeframe. That period is referred to as the loan term. Commercial real estate loan terms can be up to 30 years, however, they typically range from 1-10 years.

There are many factors that influence the loan terms for a given transaction. The borrower's specific needs, credit score and history, repayment history and exit strategy are some examples of details that lenders will take into account when determining the terms of a loan.

Loan Amortization

It is common for loan terms and the loan amortization period to be confused with one another, however, they are separate and often differ from each other. The amortization period is the time that it should take for the borrower to pay off the debt. It covers different amounts of interest and principal payments for each month of the full term of the loan. It is most common for a commercial real estate loan amortization period to be between 20-30 years. Commercial loans can often be interest only as well, with no amortization period.

After the loan’s amortization period has been established, a detailed schedule showing each payment for the entirety of the loan term. This is known as the amortization schedule and essentially serves as a record of your loan payments.

Choosing a Lender

Not only are there a variety of options when it comes to commercial real estate loans, there are also a variety of lenders. Choosing a lender that can accommodate your individual needs and who understands the complexities involved with commercial real estate investments can ensure a successful partnership.

Alternative lenders, such as private money lenders are a great resource for investors that find themselves involved in a unique investment situation. Private lenders can often provide more flexible terms and less rigorous qualification requirements than institutional lenders. Aside from the lender's ability to provide flexible options, make sure you take into consideration other factors that will influence your loan, such as origination fees, available loan programs, interest rates, documentation requirements, and prepayment penalties.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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