FAQ

Q. How long does it take to close my loan?

A. While there are many factors that affect the length of time to close a loan, if all required information is provided at the time of application, most loans will close in 35 to 45 days. Additionally, a rush fee may be paid on some requests to shorten closing time to approximately 30 days.

Q. Is Guardian Commercial Lending limited to lending in specific states?

A. Guardian Commercial Lending lends in all 50 of the United States.

Q. What is a lockout Provision?

A. Lockout Provisions penalize prepayment during a specified period. These provisions may include terms which provide a strong financial penalty for borrowers to prepay and exist in order to protect the yield expectations of investors.

Q. What is Yield Maintenance?

A. Yield Maintenance is more directly concerned with the contemporary market situation. Yield Maintenance allows the borrower to prepay without lowering the lender’s expectations of interest income. The “penalty” for prepayment is the value of the remaining payments multiplied by the percentage difference between the interest rate on the loan and the current yield from treasury bills with the same maturity.

Q. What is Defeasance?

A. Defeasance is a process in commercial lending wherein borrowers replace the collateral in the original loan transaction with substitute collateral. U.S. Treasury Bills are the preferred form of replacement collateral.

A third-party specialist will determine the amount of replacement collateral necessary to ensure that the security holders with an interest in the original loan’s predictable repayment outlay do not lose value. Of course, accountants and attorneys must be involved in the process to ensure that the defeasance agreement is financially adequate and legally valid.

Q. What is the difference between a recourse loan and a non-recourse loan?

A. A recourse loan is one in which the loan is guaranteed by the borrower personally. A non-recourse loan is one in which a third-party organization is formed for the property, such as an LLC or a corporation. If the loan defaults for any reason, the mortgage holder would then take control of the LLC or corporation.

Q. What is Net Operating Income (NOI)?

A. NOI is gross rent or income less expenses on the property.

Q. What is ADS (ANNUAL DEBT SERVICE)?

A. Annual Debt Service is the monthly principal and interest times 12 months (not including taxes and insurance in the ADS).

Q. What is a CAP rate?

A. CAP rate is a measurement of the rate of return on an investment. This is calculated by taking the NOI and dividing it by the purchase price. The NOI divided by the CAP rate = Value.

FAQ

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