Vermont Commercial Real Estate Loan Rates
Rates updated February 8th, 2023
|Loan Product||Rates (start as low as)||LTV|
|Commercial Real Estate Loan Rates||5.63%||Up to 75%||Get Free Quote|
|Multi-family Loan Rates (Over $6,000,000)||4.96%||Up to 80%||Get Free Quote|
|Multi-family Loan Rates (Under $6,000,000)||5.12%||Up to 80%||Get Free Quote|
|Single Tenant Lease Loan Rates||5.43%||Up to 75%||Get Free Quote|
|Business Real Estate Loan Rates||5.53%||Up to 90%||Get Free Quote|
Vermont Commercial Real Estate Loan FAQs
In order to combat rapidly rising inflation, in 2022 the Federal Reserve aggressively raised short term interest in multiple 75 basis point increments. At the beginning of 2022, the yield on the 30 day treasury was 0.05%. As we near the end of 2022, the yield is 3.94%. The Federal Reserve has indicated that they will continue to raise short term interest rates in 2023 although at a slower pace and in smaller increments. Commercial mortgage rates are typically priced over the 10 year treasury notes. The longer notes are more market driven and less subject to Federal Reserve action. The 10 year treasury at the end of 2022 is in the range of 3.50% - 3.60%, and commercial mortgage rates are in the mid to high 5% range. The fact that long term rates are lower than short term rates indicates that economists expect the economy to slip into a recession. We will watch these trends closely during 2023.
Some Vermont commercial mortgage lenders lock rates at application, some lenders lock rates at commitment, while others lock rates prior to closing. We are currently in the midst of an increasing rate environment. Rates quoted at application may increase dramatically during the loan application progress, if not locked. It is very important to understand your lender’s procedure upfront to avoid potential confusion.
In order for a commercial mortgage lender to issue a firm loan approval, they will want to understand the financial condition of the borrower, as well as the fundamentals of the property. The borrower will be expected to supply his personal financial statement showing total net worth and liquidity. He will also need to provide a schedule of real estate owned demonstrating experience managing similar properties. Lastly, the borrower’s credit scores will needed. For the subject property, lenders will look closely at the current rent roll, operating statements showing income and expenses, copies of all leases, and other pertinent property information.
Commercial mortgage rates are determined by many different factors, including property type, location of the property, loan-to-value ratio, debt service coverage ratio, debt yield, borrower’s net worth, liquidity, credit rating and level of experience. Commercial mortgage lenders look at all of these factors to determine the riskiness of the loan before setting rates. Loans with the lowest risk profile will get the best commercial mortgage rates. As the potential risk increases, commercial mortgage rates usually increase.
Commercial mortgage loans are viewed differently by lenders than residential loans. Home loan lenders look strictly at the borrower’s income and credit in order to qualify. Commercial mortgage lenders look at the subject property’s rent roll, operating statements, and other factors to determine the cash flow or net income potential. Very strong (low risk) commercial mortgage loans might be priced lower than home loans, while weaker performing properties (higher risk) might be priced higher.
Most commercial mortgage loans today are fixed for 5, 7, or 10 years and come with a 25-30 year amortization schedule. Loans can be recourse (personal guarantee) or non-recourse (no personal guarantee). Commercial mortgage loans typically carry prepayment penalties, whereas residential home loans usually do not. Specific terms will be determined by your lender’s underwriting team after your application is reviewed.
Commercial mortgage lenders typically lend up to 75-80% on an apartment purchase (down payment of 20-25% necessary). On other types of commercial property, commercial mortgage lenders will typically lend up to 70-75% (down payment of 25-30% necessary). An exception is for owner occupied business real estate (such as a business owner buying his own property). Owner/users may qualify for up to 90% LTV financing.
How do we help our Vermont commercial mortgage clients get the best rate and terms?
Select Commercial is a leading Vermont commercial real estate loan provider. We have excellent commercial real estate loan products and options available for owners and purchasers of commercial real estate throughout the state of Vermont. While we lend across the entire continental United States, we are able to give our best commercial mortgage rates and loan programs to certain areas that we feel are strong markets. Vermont is one of the states that we consider to be a premium market and we actively look to originate good quality loans here for our clients. As an experienced commercial mortgage professional, with over 30 years of lending experience, we have many sources of capital to choose from when placing a commercial mortgage request with a lender. Having many lenders to choose from gives us advantages over any one individual source. Finding the lender that fits the needs of each client is what we do best. In the end, you get the best rate and terms available. If you are looking to obtain a commercial real estate loan, don't hesitate to contact us. There are many reasons why our customers like doing business with Select Commercial. We have a simplified application process and we do not charge any upfront application or processing fees. We typically offer 24-hour pre-approvals with no-cost and no-obligation. Our long term fixed rates are excellent, and we look to close within 45 days of application. Our staff is professional and knowledgeable, and we look forward to working with you on your next commercial mortgage transaction.
Vermont Commercial Mortgage Benefits
Vermont commercial mortgage rates start as low as 4.79% (as of February 8th, 2023)
• A commercial mortgage broker with over 30 years of lending experience
• No upfront application or processing fees
• Simplified application process
• Up to 80% LTV on multi family , 75% on commercial (90% with SBA)
• Terms and amortizations up to 30 years
• Loans for purchase and refinance, including cash-out
• 24 hour written pre-approvals with no cost and no obligation
Recent TRUSTPILOT Reviews
Select Commercial Funding Reviews from TRUSTPILOT
A three year journey
"Thanks Stephen for all of your hard work in getting our deal closed! I appreciate your professionalism and patience throughout a complicated process. You always were there for my partner and I whenever we had questions and needed answers quick. It was a pleasure to have worked with you and Select Commercial!"
What is happening with Vermont Commercial Real Estate Loans in 2023?
As we begin 2023, the Vermont commercial real estate loan market is facing some obstacles and challenges. In 2022, we saw rampant inflation and a corresponding rapid rise in increase rates initiated by the Federal Reserve. Higher interest rates (and the resulting higher mortgage payments) caused many existing properties to experience cash flow problems, and many new sales to cancel due to cash flow. Towards the end of 2022, we saw inflation start to lessen, but overall, inflation was still running at a rate exceeding 7% per year. The Federal Reserve announced that they intend to continue to raise short term rates during 2023, although at a slower pace than 2022. Their intent is to get inflation down to their target rate of approximately 2%. Higher rates and tighter cash flow are expected to cause cap commercial mortgage rates to climb and commercial real estate values to drop.
While economists expect a slowdown in 2023, most are hopeful that we will not face a steep recession. Corporate profits are strong and employment numbers are solid. While some companies have started to announce layoffs, most believe that they will not be as dramatic as in past recessions. Experts expect unemployment to remain below 6%, a positive sign that this recession will not be severe. Economists expect that lower inflation might cause a softening or rates in the third and fourth quarters of 2023.
In 2023, the Vermont commercial real estate market will be most strongly affected by the increased rates caused by the action of the Federal Reserve. As we began 2022, the rate on the 10-year treasury was 1.63%. As we begin 2023, this yield is at 3.84%. Since most commercial mortgage loans are based off the 10-year treasury, many properties will not support high leverage commercial mortgages due to insufficient cash flow. This will result in either: sellers will be forced to lower asking prices, or sellers will not put their properties on the market in 2023.
There is some positive news for commercial mortgage loans in 2023. Assuming the rate of inflation lessens, we might see a drop in commercial mortgage rates in the third and fourth quarters of 2023. There is a record amount of securitized loans set to mature in 2023 in the commercial mortgage-backed securities (CMBS) market. These loans will need to be refinanced and this high level of activity is likely to generate activity in the capital markets.
As we begin 2023, commercial mortgage rates are very volatile, and the market is expected to get off to a slow start. We hope to see a leveling off effect later in the year and a resumption of activity later in 2023.
How will Covid-19, inflation and other factors influence commercial properties in 2023?
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What areas of Vermont does Selct Commercial provide financing?
Select Commercial provides commercial real estate loans throughout the state of Vermont including but not limited to the areas below.
• Burlington • South Burlington • Rutland • Barre • Montpelier • Winooski • St. Albans • Newport • Vergennes