The subject of this article may seem confusing because most people think a 30-year fixed commercial mortgage is just as prevalent as a 30-year fixed residential mortgage. Once you start looking for a 30-year fixed commercial real estate mortgage you quickly realize that they are tough, if not impossible to come by.
So why can you easily find a residential 30-year fixed mortgage but not a commercial one? 30-year fixed mortgages exist in abundance in the residential loan space because most lenders sell their loans to Fannie Mae or Freddie Mac for a premium. The government has no problem holding debt for 30 years because it isn’t going anywhere, and will realize a sizable return on its mortgage investments regardless of how interest rates fluctuate. Also, the government often pools purchased loans and sells them as securities to institutional investors for a return. The original residential lender doesn’t mind originating 30-year fixed loans because it gets paid as soon as it sells the loan.
So who offers 30-year fixed commercial mortgages? In pursuit of a 30-year fixed commercial mortgage you may think the best place to start looking is at a bank (assuming you are bankable); but a bank is the least likely place to find one. A bank portfolios or holds all its loans, it doesn’t usually sell them. A bank earns revenue by maximizing its return on depositor capital and because the fate of interest rates is unpredictable, locking up capital for an extended period that could be at below market returns is not beneficial. A bank often wants you to pay off your loan early, which is why it usually has a 5 or 10-year balloon payment requirement (a balloon is when your loan expires and it must be paid off), or a shorter amortization of 15 or 20 years (meaning principal gets paid down faster).
It turns out that non-bank commercial real estate lenders are the key to finding a 30-year fixed commercial mortgage. A non-bank commercial real estate lender, like a residential lender, earns its return when it sells or securitizes its loans, so it has no problem originating a longer term fixed commercial mortgage. That being said, commercial investors are not as familiar or comfortable with buying 30-year fixed loans from commercial lenders because commercial loans have more factors that could contribute to a default over a lengthy period of time.
So which lender has a 30 year fixed commercial mortgage? If you search the internet you’ll see a lot of commercial real estate lenders that offer 30 year mortgage amortizations, but not 30-year fixed mortgages. You’ll also find a lot of articles and blog posts about how hard it is to find a 30-year fixed commercial mortgage. Fortunately, South End Capital rolled out a 30-year fixed-rate commercial real estate mortgage in early 2019. South End Capital’s rates start at 5.75%, it is a stated income and/or light documentation lender so its process is super simple, and you can even finance up to 80% of your commercial property’s value.
What’s the catch? You might expect South End Capital to offer a 30-year fixed commercial mortgage to only the best borrowers and on the most generic commercial property types, but that isn’t the case. Borrowers with credit down to 620, who haven’t filed or can’t produce tax returns, or who even have overdue income taxes are eligible. South End Capital offers 30-year fixed commercial mortgages on a variety of property types including more special-purpose property like bars, restaurants, nightclubs, daycare, auto-service, auto-dealerships, mobile home parks, industrial property and more.
If you are looking for a 30-year fixed mortgage for your investment single family residence, condominium or 2 to 4 unit multifamily property, South End Capital does offer them but Patch of Land also just rolled out a 30-year fixed rental property mortgage. Patch of Land’s program offers 5, 10 or 30-year fixed mortgages from $75,000 to $5 million, with financing up to 80% LTV and interest rates starting at 5.49%.
30-year fixed rate commercial mortgages do exist, they are just very hard to find unless you know the right place to look. LendVer is focused on finding lenders that provide the unique programs our readers are looking for. South End Capital is a great option for almost any borrower looking for a 30-year fixed commercial mortgage as long as you meet its underwriting guidelines.
Want to learn more about 30-year fixed commercial real estate loans? Contact our recommended commercial real estate lender South End Capital.