Mixed-use properties are defined as properties with a residential component and a commercial component. Noting this unique zoning structure, buyers also have different ways of acquiring such property. One way is via a mixed-use loan, which offers several benefits compared to alternative financing needs.
Some examples of mixed-use properties include apartment buildings with first-floor commercial or retail space, a store with apartment units on the upper floors or a single-family property with dedicated office space included somewhere within the structure. Such types of properties are common in New York City, Long Island and the surrounding area.
Why are mixed-use loans an ideal financing option for applicable properties? They often have flexible repayment terms (and no prepayment fees), low interest rates and other fees, can be classified in various ways and typically don’t require a large down payment. Read on to learn more or contact Island Federal Credit Union today for more information.
What are Mixed-Use Loans?
Mixed-use loans are a type of loan that’s often sought after for mixed use property financing. That is, a property that has a mix of residential and commercial uses. In addition to purchasing a mixed-use property, such loans may also be sought after to build a mixed-use property or add on to an existing property so that it is zoned as a mixed-use property.
Mixed-use properties may consist of single-family homes with attached daycare centers, apartment units with ground-floor retail, or storefronts with second or third-story apartments.
Mixed-use loans are typically only approved following a property appraisal and inspection to verify the value and condition of the property. This also helps determine and align with any loan terms. In some cases, other inspections may also be required. These may include environmental inspections and land surveys, which are important for lenders to properly assess the level of risk involved should they issue the loan.
Types of Mixed-Use Loans
There are three main types of mixed-use loans: short-term, commercial and government-backed. Here’s a closer look at each type of mixed-use loan and when they’d be most applicable:
Short-term
Commercial loans typically require a 10 percent down payment, with repayment terms that range from 6 months to 3 years. Ideal for developers who specialize in flipping properties, short-term loans tend to be easy to qualify for, come with fast approval and feature interest rates that range from 7 percent to 20 percent. The typical maximum loan amount is up to $50 million. Short-term loans are also ideal for borrowers who need access to funding quickly or have a property that they need to quickly finance repairs on.
Commercial
Commercial loans are easy to qualify for and tend to have lower interest rates (6 to 9 percent) compared to other types of mixed-use loans. The typical down payment amount is 25 percent and repayment can span the course of 30 years. Commercial loans are ideal for those looking to build new mixed-use developments and for real estate investment purposes.
Government-backed
Government-backed mixed-use loans are guaranteed by a government entity and tend to offer a lower overall risk to lenders. They also tend to come with low fees and interest rates (6 to 16 percent). However, because the government is involved in issuing these loans, approval tends to take longer. There are also stricter eligibility criteria that must be met. Government-backed mixed-use loans are ideal for those who don’t mind waiting a bit longer for approval and those who have a good credit history.
How to Qualify for a Mixed-Use Loan
Like any type of loan, there’s a process involved to qualify for a mixed-use loan. It starts with running a credit check and then determining the LTV ratio and any tenant requirements that may be assessed by lenders.
Next, several inspections may be required to qualify for a mixed-use loan, the most important of which is often the appraisal inspection that ensures the value and conditions of the property align with the loan terms. Depending on the type of property, additional inspections may also be required. Some other common inspections are environmental inspections and land survey inspections.
If you have questions about whether you qualify for a mixed-use loan or need assistance going through the process, contact Island Federal today. We’ll work with you and take you step-by-step through the process of applying for a mixed-use loan.
Benefits of Mixed-Use Loans
Mixed-use loans offer several benefits over other types of lending for mixed-use properties. Here’s a closer look at some of these benefits:
- Mixed-use loans diversify income streams from tenants of residential and commercial spaces.
- Mixed-use loans are often sought to acquire or build mixed-use property in bustling urban areas, allowing investors to take advantage of real estate trends.
- Financing is flexible. There are different types of mixed-use loans depending on your needs, with various maximum borrowing amounts and repayment terms. There are also no prepayment penalties when you work through Island Federal.
- There’s the potential for higher property value and appreciation over time.
Is a Mixed Use Loan Right for You?
Mixed-use loans aren’t for everyone, so how do you know if one is right for you? Here’s a look at some circumstances where a mixed-use loan is likely ideal:
- You’re an investor or a business owner seeking dual-purpose properties or to generate income from commercial and/or residential units.
- You’re looking to build a new mixed-use development.
- You’re financing a property that needs repair.
Still deciding whether a mixed-use loan is right for you? Contact Island Federal today to schedule a free consultation with a loan officer at one of our Long Island branches.
Steps to Apply for a Mixed-Use Loan with Island FCU
Like all loans, there’s a process that borrowers have to go through. It starts with prequalification, which includes submitting all necessary documentation and going through a credit check. From here, an appraisal and inspection will be carried out on the property (as well as any other required inspections).
After you’ve gone through the process, the loan may take anywhere from 10 days to several months for approval depending on the type of mixed-use loan you’re applying for. For instance, short-term loans may be approved in as little as a few days, while government-backed loans may take up to 90 days.
Find the Right Loan for Your Mixed-Use Property
If you’re an investor or business owner looking for flexibility and competitive rates, a mixed-use loan could be right for you. At Island Federal, it’s our mission to offer more than just great rates to Long Island investors and business owners, but to provide expert guidance that ensures that any unique needs are met. Take the next step in your investment journey by contacting Island Federal and scheduling a consultation today.
Partner with Island FCU for Your Mixed-Use Loan Needs
Contact Island Federal today to learn about our tailored financing solutions and begin the application process for your mixed-use loan. Our personalized approach to helping borrowers secure financing is only matched by our competitive rates, convenient application process and expert-level support. We’re standing by and happy to explain the benefits of a mixed-use loan, from its flexible repayment terms (and no prepayment penalty) to competitive interest rates.
Don’t wait – contact Island Federal today at 631-851-1100 or stop into one of our branches.
FAQs
What is a mixed-use property loan?
Mixed-use loans are a type of loan that’s often sought after to purchase or modify a mixed-use property.
How does a mixed-use loan differ from a traditional mortgage?
Mixed-use loans only apply to mixed-use properties. Mortgages and other traditional loans, conversely, are used to finance residential properties.
What are the typical qualification requirements for a mixed-use loan?
Mixed-use loans are similar to other types of loans in that they often require a down payment. To qualify, borrowers must have a good credit history, comply with any tenant revenue requirements, and also be subject to at least an appraisal and inspection.
Can I live in a property financed with a mixed-use loan?
Typically, there are no residency requirements for mixed-use loans. Be sure to check with your lender on the terms and conditions regarding residential and commercial tenants.
How do lenders assess mixed-use properties?
Lenders assess mixed-use properties by conducting an appraisal and inspection of such properties.
How can Island FCU assist me in securing a mixed-use loan?
At Island Federal, we’ll work with you and take you step-by-step through the process of applying for a mixed-use loan. We’ll make sure that you meet all the necessary qualifications and help ensure that you’re set up for approval. Contact us today to learn more.