Can anyone give me a ballpark figure for the interest rate for a loan secured by an office building?
I can imagine that this varies widely according to geography and other particulars. But at this point, any data point is better than none.
For example, bankrate.com shows an overnight average of about 6.5% for a 30-yr fixed-rate home mortgage (non-jumbo). I am looking for a similar number (i.e. a "typical" or average rate) for commecial property. I have not found a suitable online commercial loan calculators.
What do you think about carrying a loan as an investment in a living trust for an 83-year-old person in good health?
(Translation: life expectancy of 5-10 years.)
My deceased father's estate (Decedent's Trust) carries a loan at 12%. That's a very good ROI. The loan is about 17% of the value of my father's estate, and about
5% of that combined with the estate of my mother, the living beneficiary of the DT. Currently, my mother does not rely on the DT for income. It is very likely that she will not need to call in the loan to satisfy income requirements, barring unforeseen major medical expenses.But I am wondering about the risks.
The borrower has made all payments on time for the past
7 years. But if commercial rates are anything like home mortgage rates, I am wondering why the borrower tolerates such a high interest rate instead of refinancing. Other factors: (a) the borrower has been unsuccessful at selling the property, for unknown reasons; and (b) the economic landscape has changed.I wonder if it suggests that he might be a credit risk in some way.
As a lender of a secured loan, I suspect that we are entitled to request a credit report. (I will ask our estate attorney.) But I doubt that we will know how to interpret it in order to assess risk. And there are other reasons why we might not want to request a credit report.
Since we are in the process of updating the original loan agreement, which has been extended for many years based only on oral agreements, I am wondering if we should consider calling in the loan now.
Then again, I keep looking at the 12% ROI :-).