Key takeaways
- The property usually secures the loan.
- Lenders focus on LTV and DSCR.
- Plan ahead for any balloon payment.
Best for
Businesses buying their location or investors buying income property.
How it works
The property secures the loan. Lenders look at the property's value, your down payment, and the property's or business's ability to cover payments.
Key terms
Loan-to-value (LTV) compares the loan to the property value. Debt service coverage ratio (DSCR) compares income to loan payments. Some loans end with a balloon payment.
Pros and cons
Advantages
- Build equity instead of paying rent
- Longer terms available
Things to weigh
- Larger down payments
- Balloon payments may require refinancing
Frequently asked questions
What is DSCR?
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Debt service coverage ratio compares income to loan payments. A higher ratio means more cushion to cover payments.
What's a balloon payment?
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A large lump sum due at the end of the term, often paid by refinancing or selling the property.
This guide is general educational information, not financial, legal, or tax advice. Terms, requirements, and availability vary by lender and your situation.