Hi all
I was hoping someone with commercial lending knowledge could help me understand the risks and impact of the following commercial loan.
I am looking, as an option, of taking out a commercial loan to fund a 6 unit development and pay out current resi loan. The loan suggested by my broker is based on a 90 day bank bill commercial funding. Total rate is equivalent 4.99% p.a, which is quite comparable to resi lending.
What are the risks and pitfalls of this type of loan?
Loan details:
Commercial property LVR 70% based on an in one line value
Commercial Advance
Limit $1,750,000
Interest rate 2.70% (90 day BBSY)
Repayments Interest only
Term 3 years then to be renegotiated
Client margin 2.29% subject to confirmation of the clients credit risk rating.
Unused Limit Fee 0.50%
Rollover fee $150 per quarterly rollover
Security
Will comprise as follows
Mortgage over block of 6 residential units Est value $2.7m excl GST
GSI over borrowing entity
Directors guarantees
Additional security may be required once the application has been received and fully assessed
Non Bank Fees
Government fees to be met by the client
Valuation Fees to be met by client
Quantity Surveyor initial report and progress inspections to be met by client
Bank Fees
Establishment fee 0.5%
Document Handling $500
I was hoping someone with commercial lending knowledge could help me understand the risks and impact of the following commercial loan.
I am looking, as an option, of taking out a commercial loan to fund a 6 unit development and pay out current resi loan. The loan suggested by my broker is based on a 90 day bank bill commercial funding. Total rate is equivalent 4.99% p.a, which is quite comparable to resi lending.
What are the risks and pitfalls of this type of loan?
Loan details:
Commercial property LVR 70% based on an in one line value
Commercial Advance
Limit $1,750,000
Interest rate 2.70% (90 day BBSY)
Repayments Interest only
Term 3 years then to be renegotiated
Client margin 2.29% subject to confirmation of the clients credit risk rating.
Unused Limit Fee 0.50%
Rollover fee $150 per quarterly rollover
Security
Will comprise as follows
Mortgage over block of 6 residential units Est value $2.7m excl GST
GSI over borrowing entity
Directors guarantees
Additional security may be required once the application has been received and fully assessed
Non Bank Fees
Government fees to be met by the client
Valuation Fees to be met by client
Quantity Surveyor initial report and progress inspections to be met by client
Bank Fees
Establishment fee 0.5%
Document Handling $500