You have been retained by a client to evaluate financing options for a new commercial project.
The permanent financing will need to cover $4,000,000 and the client has approximately $40,000 in liquid funds available for all closing expenses, including downpayment.
The client estimates that they will want to own the property between 5 and 10 years, inclusive. Prepare a report recommending the best loan for this client.
Be sure to discuss any risks present or considerations the client should keep in mind (for instance, if one loan is better at 5 years but worse at 10).
|
Description
|
Rate
|
Closing Costs
|
Terms
|
Prepayment
|
|
|
|
|
|
|
Fixed
|
5% for $3,000,000, 8.5% for $1million
|
35000
|
20 Year Amortization
|
No Penalty
|
Floating rate loans have a 2% annual cap and a 5% lifetime cap. Downpayment is part of the discussion, subject to the clients budget and discussed lending limits.
A lockout period means no prepayment is allowed over the stated time period.
Prepayment Penalties are calculated as a % of initial loan balance.