Lower Personal Recourse
In today’s conservative lending market, expect personal recourse to be a requirement. The higher the leverage, the less willing a lender will be to offer a break on recourse. Some non-recourse loans are now offered at a 60 or 65 percent loan-to-value basis, but come with interest rate premiums of .5 to1.5 percent. If conduit loans return, more competitively priced non-recourse options should be available.
Lengthen the Loan Term
Seek a loan term long enough to avoid placing you in a compromising position caused by market factors, but short enough to not lock you into refinancing that can’t be paid off without expensive prepayment penalties. A three- to five-year loan term is a reasonable position given today’s market conditions. Loans over five-year terms are now being offered at rates in the mid-7 percent range and higher.
Regardless of your position on the refinancing field, you shouldn’t view your situation as fourth and long. While lenders are playing more conservatively and will likely expect you to have a higher equity position, there are also many healthy banks actively lending. Remember, the wind is still at your back with attractive interest rates. Finally, if you need some extra coaching, consider seeking advice from a storage-industry mortgage broker who is on the lending field every day regardless of market conditions.
Neal Gussis is a principal with Beacon Realty Capital, a Chicago-based full-service financing firm and provider of self-storage mortgage services. He can be reached at 312.207.8240; e-mail firstname.lastname@example.org.