Major Property Loans/Debt Financing/Refinancing

The amount of a loan requested usually with traditional lenders does not exceed eighty (80) percent of the appraised value of the project. If the loan request is due to a purchase than the loan amount will not exceed eighty percent of the purchase price if that is lower than the appraised value.

As an example, if an apartment complex is appraised at $1,000,000.00, the maximum loan amount is usually not more than $800,000.00. However, if the apartment being purchased is for only $900,000.00, then the maximum loan amount will be $720,000.00 or eighty percent.

The borrower purchasing the apartment traditionally will be looked upon for the difference and for equity contribution making up the difference. This difference can be either in cash, or in the assets of the borrower not requiring the borrower to use his cash. In other words, the borrower is strong enough so that the lender will entertain more of a loan.

However, if there is a difference due to the lessor of the purchase price or appraised value, then often a second mortgage may be carried back by the seller in order to have sufficient balance of payment.

Usually, in order to have a second mortgage and effectuate 100 percent financing, it must be disclosed to the lender and the lender has to be certain that the borrower has more than enough cash value in his personal and business statements to maintain the loan-to-value ratio of eighty percent (80%).

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