How can you use a residential loan to finance a business? And, why would you?

Business loans tend to have higher rates and costs than residential loans, and may be adjustable.

The residential loan can be fixed. For instance, if you have equity in your home, or other residential properties, you could refinance and take cash out of one of these properties to purchase the business or investment. The lien would be on your residential property, but the loan terms may be more favorable than the commercial loan.

We had a scenario where a client was looking to purchase five four-plexes. There was one contract signed to purchase all five properties. He was looking for a commercial loan for financing. We researched commercial loans to see what would be available for this purchase. During our research we found the commercial loans resulted in high costs and rates, and the terms were adjustable. We thought that if we could put residential loans on the properties, we could have lower fixed rates and costs. We discussed the options with the client, and he decided it would be more cost effective to have separate contracts for each 4-plex and place residential loans on the properties. We were able to get fixed rate loans so that his monthly cost is fixed, and his profits would not vary due to an adjustable rate with a commercial loan.

This is just one example where we can assist you in choosing the right financing option.

Contact us and we can help you! We offer a variety of products and services, ask us how we can assist you today. We work for you, not the lender.