What is a Real Estate Mezzanine Loan?
Are you curious to know what a real estate mezzanine loan is?
If so, you have come to the right place. We have years of experience helping commercial real estate investors in the sub $3MM space with this unique financial tool.
Although the term “mezzanine loan” is fairly common, for newer investors, it may still be somewhat abstract. This is why we have decided to explain this topic in easy-to-understand terms.
So, what is a real estate mezzanine loan?
Simply put, it is additional financing or sometimes referred to as a second mortgage, on top of conventional financing to give you higher leverage when buying or refinancing your investment property. It is a part of mezzanine financing.
Check Out This Example
Let us say that you want to invest in a $1MM property, but the loan you get from the bank is only for $700k. This now leaves you with a $300k gap to fill.
Given that you still need that additional $300k to actually make the investment, one option would be to go to a mezzanine lender who would provide you with an additional loan to help reduce the equity needed. For example, in that situation, we would be willing to provide a mezzanine loan of $150k. Now you have a total loan of $850k and only need to use $150k of your equity.
Why Mezzanine Loans Are Used
Mezzanine loans are a perfect solution for many commercial real estate investors since a lot of mortgage lenders do not fund real estate projects 100 percent.In fact, most lenders only fund about 60 to 70 percent.
Mezzanine loans are often used by investors who want to purchase property without putting down too much cash or investors wanting to pull cash out of their existing properties.
Interest rates for mezzanine loans are typically higher than they are for traditional bank loans, but mezzanine loans are also less expensive than other forms of financing, such as private equity.
Partner With An Investor-Friendly Company
If you need a mezzanine loan, it is a good idea to work with an investor-friendly company.
We have years of experience helping investors succeed, offering flexible loans with reasonable interest rates, and quick turnaround times.
If you would like to work with a reliable lender that has been in business since 1989, give us a call today at 561-221-0900 or email us at info@geltfinancial.com.
We will work closely with you every step of the way from application to closing.
