Check out the course at https://www.realestatefinanceacademy.com/ For Commercial Loans, visit https://www.evergreen.llc A promissory note is the document used to show the evidence of debt in the case of a loan and the promise on the part of the borrower to repay the loan and the conditions under which those repayments are made. Important to note is that typically loans are made with recourse. And recourse means that the borrower is personally liable for the total amount of the debt, regardless of whether or not there is enough security or collateral to cover that debt in the event of foreclosure. Sometimes loans can be what's called non-recourse in which case is only the collateral that is used to cover the debt in case of default. But that would need to be specifically defined in the loan documents. As the loan is being paid down, the amount that is left to be repaid is typically called the unpaid principal balance. Most often loans are advanced with all of the principal loan to the borrower upfront, but that's not always the case. There are other types of loans, like construction loans, lines of credit where advances can be made incrementally or in separate parts. The interest rate is the costs that the borrower pays to the lender for the use of their funds. The interest rate is expressed in annual terms such as 6% per year. And the interest rate can be either fixed or adjustable depending on the type of loan that's being made. Monthly or annual payments - The promissory note will designate the number of payments, the amount of the payments and the date on which each payment is due. Whether it be monthly annually, quarterly, what have you. Application of payments- Payments can be put towards interest, principal fees and other items. The promissory note will designate in what order those payments are applied. Typically in real estate, we see payments are applied to any outstanding fees, then interest, and then whatever's left over is applied to the principal. Maturity date determines the term of the loan or the length of the loan and the maturity date is the date on which all unpaid principal balance is due. Along with the maturity date is the amortization quite often the amortization and the term of the loan are the same, say 30 years, but not always. Sometimes the term of the loan will be shorter, but payments will be amortized over a longer period. In that case, we end up with a balloon payment at the end. Collateral - Usually in real estate, this is accompanied by a mortgage document or a deed of trust that links the promissory note and the collateral together in the event of default, the lender can Sue on the note and foreclose on the mortgage going after the security or the collateral at the same time. Default is when the terms of the note have been violated by either non-payment or what we call technical default. When say the borrower doesn't maintain the property to the appropriate levels or fails to pay their property taxes. When default happens, the lender issues a notice of default and invokes what they call the acceleration clause. And that means that all amounts that are payable are now due. This is usually the first step in the process on the way to foreclosure. Prepayment, or paying a loan off early, is considered a privilege, not a right. Lenders make loans for the purpose of earning interest on the money they lend, and if a loan is repaid early, the lender is not able to make the yield that they were expecting. A prepayment penalty is if a loan is paid off early. It can be a step-down penalty as a percentage of the unpaid balance. Or other formulas such as yield maintenance or defeasance. Assumability clause is the ability for the borrower to substitute another borrower in their place. The loan will have provisions in there for what must be done for a new borrower to assume the loan. There's also, what's typically called an assumption fee, which is similar to an application or a written origination fee and not the new borrower who is trying to assume the loan will pay a fee to the lender in order to process the loan assumption. #commercialloan #commercialrealestatecoaching #TrevorCalton #investing #realestate #EvergreenLLC #realestateinvesting #commercialrealestate #finance #realestatetraining #realestatementoring #realestatefinance #brueggeman #fisher #linneman #stepbystep #stepbysteptutorial #diagram #example #download #freedownload #howto CRE loan investing in real estate investment properties and commercial real estate commercial real estate lending commercial real estate loan SBA commercial real estate loan commercial real estate financing commercial property loan commercial building loan real estate lending best commercial real estate loans commercial property lending

• published: 17 Jun 2019
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