LVR's and the Lenders
The Major banks typically set their Loan to Value Ratios (LVRs) on commercial property between 70% to 80%. Commercial property for Investment is typically up to 70% and for Owner-occupied up to 80%. Depending on the strength and security position of the borrower, the banks may allow you to borrow above these LVRs. These loans will generally incur higher rates, fees, and likely additional conditions to manage the higher risk of the loan.
When a major bank isn't an option, the non-bank lenders are a good alternative. They offer Full Doc, Low Doc and Alt Doc loans, as well as Prime and Near Prime options, with generally more relaxed lending rules and criteria. LVRs of up to 80% for both investment and owner-occupied commercial property are available. These non-banks have a large and diverse product range. Loan interest rates and upfront fees are higher, but eligible deals can get financed. Your broker can help you navigate the many products, pricing and terms available that will best suit your situation and needs.
Additionally, there is the growing private lenders market which is made up of private equity, investment funds, and surplus cash from organisations and wealthy individuals seeking higher yields. Private lenders now fund around 20% of Australia's commercial real estate debt. They are generally passive security lenders with higher rates and fees, but typically come with generous terms for shorter lends up to 3 years. They generally lend up to 75% LVR.
Summary of selected commercial property loan types across different banks
| Loan Attribute | Major Banks | Non-bank Lenders | Private Lenders |
|---|---|---|---|
| Rates | Lowest | Higher, approx. +1-2.5% | Highest, +3-5% |
| LVR Investment Commercial Property | Up to 70% | Up to 80% | Up to 75%, but depends on location and property type |
| LVR Owner-occupied Commercial Property | Up to 80% | Up to 80% | Up to 75%, but depends on location and property type |
| Loan Term | Up to 30 years | Up to 30 years | Generally up to 3 years. Need a defined clearance source (e.g. property sale) |
| Loan Type | Full Doc | Full Doc, Low Doc, Alt-Doc | Low Doc, Alt-Doc |
| SMSF's | No | Yes | Yes |
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