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FAQ
1. How do I know how much of a commercial property I can afford? Answer
2. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
3. How is an index and margin used in an ARM? Answer
4. How do I know which type of mortgage is best for me? Answer
5. What does my mortgage payment include? Answer
6. How much cash will I need to purchase a commercial property? Answer

Q : How do I know how much of a commercial property I can afford?
A : Unlike residential loans, the process of financing commercial income properties is not driven by the borrower's income so much as it is the property's ability to generate income on its own. And therefore, the property's income is used for qualifying purposes as it is directly related to the loan amount that the property can support after expenses. This is also referred to as Debt Service Coverage or "DSC". However, the amount that you can borrow will also depend upon the borrower's cash investment into the property in the form of a down payment as it commercial property financing is capped off as a percentage of the purchase price. You may also be able to take advantage of special loan programs that offer creative financing options which permit for higher combined loan amounts on certain types of income producing properties. Give us a call to discuss your options on a specific property.
 
Q : What is the difference between a fixed-rate loan and an adjustable-rate loan?
A : With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
 
Q : How is an index and margin used in an ARM?
A : An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).
 
Q : How do I know which type of mortgage is best for me?
A : There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Westshore Mtg & Investment can help you evaluate your choices and help you make the most appropriate decision.
 
Q : What does my mortgage payment include?
A : For most homeowners, the monthly mortgage payments include three separate parts:
  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
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    Q : How much cash will I need to purchase a commercial property?
    A : The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
  • Earnest Money: The deposit that is supplied when you make an offer on the property
  • Down Payment: A percentage of the cost of the property that is due at settlement
  • Closing Costs: Costs associated with processing paperwork to purchase or refinance a commercial, income property
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