Apartment Building Mortgages, a Different Type of Real Estate Commercial Loans

If you are looking to become a landlord you need to understand apartment building mortgages. These are considered commercial real estate investment and as income generating property a commercial mortgage is required instead of a standard real estate mortgage.A commercial real estate mortgage can have an adjustable or fixed rate of interest. If interest rates are expected to decrease over time than an adjustable rate mortgage is beneficial, otherwise a fixed rate of interest rate is better. Apartment financing is generally amortized with payments over a period of 15 to 25 years and a balloon payment will be due to pay off the loan. Commercial mortgage brokers can help you to do the research necessary to find the best loan for your needs.Apartment building mortgages have different requirement than residential real estate mortgages. Instead of looking at your income and length of time you have been employed, underwriting for multifamily loans requires debt service coverage ratio. Debt service coverage ratio calculated by dividing the monthly mortgage payment by the net cash flow or the income the property produces. The standard debt service coverage ratio is 1:1 – 1:4. In addition, a 20% upfront payment is often required.Other possible cons of a commercial investment real estate mortgage are that the closing costs have to be paid upfront and they are not always easy to refinance. Apartment financing can be obtained through private lenders as well as banks, and sometimes private companies can offer a better rate than banks.Apartment building mortgages need careful research to make sure you are obtaining the best deal for you. In addition to researching lenders, you need to do due diligence on potential properties. Make sure the location of the property will help you secure stable, paying tenants. A realtor can help you find good rental properties in your area. Commercial mortgage brokers can help you find decent properties in addition to assisting you in finding the best deal with the best lender for you.