Bryan Ziegenfuse Explains the Important Things to Understand About Lending
In real estate, buying a home is done through residential lending, while purchasing a commercial property, or business is called commercial lending. are very different.
“You don’t necessarily need to be an expert in commercial and residential lending, as long as you find someone trustworthy to advise you in the process and answer all your questions,” said Bryan Ziegenfuse, who has worked for decades across the lending, capital markets, finance, and portfolio management disciplines.
Bryan R. Ziegenfuse has led numerous corporate initiatives across risk management, capital preservation, customer experience, and asset management. He manages key government relationships for his company and has held titles such as Director of Restructuring, Senior Fixed Income Trader and Director of Finance.
Here are five things to understand about commercial and residential lending, according to Bryan Ziegenfuse.
- Residential loans deal with living space— like homes, condos, and apartments — while commercial loans are for commerce — like land, office space, retail space, and industrial space. “There are different processes involved with loans related to residential versus commercial properties, so it’s important to know which one you are in the market for,” Bryan R. Ziegenfuse said.
- When it comes to purchasing a home (residential), a mortgage lender is used. But when someone wants to buy a commercial property, a lending company that has expertise in that type of property should be used. Commercial lenders typically specialize in a particular area, such as land, office space, retail space, etc. “Capital sources and interest rates for different types of commercial property vary greatly, so it’s important to find a lender who specializes in what you are purchasing so they can analyze your property loan accurately,” Bryan Ziegenfuse said.
- With residential home loans, a 30-year term is a standard, though 15 and 40-year terms are also options. On the other hand, the risk is deemed to be greater with commercial loans than residential, so shorter terms are typical for commercial loans. A 10-year term is a standard.
- When it comes to a residential loan, the down payment is typically negotiable depending on the housing market, said Bryan Ziegenfuse. In some cases, a zero-down mortgage is possible if the borrower has good credit. But since commercial loans are considered riskier, a 20 percent down payment is the standard.
- Another differentiating factor between these types of loans is the potential penalty for prepayment, said Bryan R. Ziegenfuse. While a residential home loan can be paid off any time without a penalty, there are usually prepayment penalties that apply to commercial real estate loans, usually on a sliding scale.