Property and real estate laws cover a wide area that is regulated by state and federal statutes. Various aspects overlap under this law. Real estate and real property can used interchangeably when describing this law. Many people associate real estate with buildings and structures and land.
However, real estate law encompasses more than tangible aspects. The law includes the land that the property is built on and immovable structures like minerals, bushes, trees, and houses which are permanently fixed to the land. It also consists of rights and benefits that are considered to be attached to the real property and can include certain rights to drill the ground beneath it, rights to live on the property and period required to acquire the property. The practice of property and real estate law deals with many issues such as interests and rights in real property sales, purchases and other transfer of property. For landlords, it could deal with renters, tenants and homeowners.
Commercial real estate is an income generating project which is used for business purposes such as office complexes, apartment and retail centers. Financing such huge projects can be a challenging task. Financing including acquisition, development and construction of the property can be accomplished by real estate loans. Independent lenders are involved in financing real estate loans.
When you have a real estate project that you want to begin, you should look for a solid financial partner who can help you achieve your dreams. A borrower may not have credit history or a superb financial record that conventional lenders require to give loans. Usually, this provides the lender with a record from whom they will be able to recover their debt if you default the loan. If the guarantee is not required by your lender, then in the event that the loan is defaulted, it will be a non-recourse loan. In some cases, real estate loans are paid in regular installments over time.
Residential buyers have conventional options of loan amortization. This is paid in smaller monthly payments and they usually incur high interest rates. Unlike residential loans, real estate loans are typically short duration loans and the amortization period is longer for the term loan. The length of loan period and amortization affect the loan’s interest rate. Depending on your lender, the terms are usually negotiable. The longer the repayment schedule, the higher the interest rate and vice versa. A main difference between residential and commercial real estate loan is the loan to value ratio. This figure measures the value of the property against the value of the loan. Interest rates on real estate loans are usually higher than residential loans. Commercial real estate loans may involve fees such as loan origination or survey fees, loan application fees, legal fees and appraisal fees. These fees will increase the overall costs of the loan. Some costs in real estate loans must be paid upfront before the project starts.
Does Real Estate Loans Have Prepayment?
A commercial real estate loan is designed to safeguard the lender’s anticipated earnings. If you, the investor want to settle the loan before maturity date, you are likely to face prepayment penalties. There are four common prepayment penalties that the borrower may be charged with. Prepayment penalty is a common prepayment penalty that you will be charged with.
This is calculated on the outstanding balance by specified prepayment fees. Interest guarantees that your lender is entitled to a specified amount of money even if you are able to repay the loan early. Lockout fees are another type of penalty that you will pay if you decide to repay the loan early. Your lender will not allow you to repay the loan before a specified period such as five years. The last fee that the borrower will be required to pay is defeasance. This is paying cash to the lender in exchange for new collateral.
With commercial real estate, the investor that purchases the property will lease out the space and collect rent from the businesses which operate within his property. The investment is intended to generate income. When calculating the loan, your lender will look at the value of the property and your creditworthiness.
In some states, you cannot sell or buy a house without a real estate lawyer. In states such as Maine, Kentucky or Georgia, it is very important to have a real estate lawyer to evaluate the information and give you feedback on what to expect. Your lender and your title company may require you to have a lawyer present. Having an attorney present is helpful because there are rules and regulations governing commercial real estate in each state.
In a situation where you have file bankruptcy, it is in your best interest to consult a lawyer for further advice. An attorney can be a major asset for a real estate team that deals with property as part of someone’s estate. In some cases, you may have to find an attorney to assist you in selling or buying a house. Before receiving their licenses, real estate agents are required to have thorough understanding of standard documents that sellers and buyers need.
According to reports, investing in real estate property could benefit a borrower because you will increase your net worth as well as have an income generating activity. Your property is collateral so you will not have to worry about repayment as long as you maintain optimal occupancy and rent is paid on time. Conventional loans and real estate investment trust are expensive for some people and you should look for alternative loans.