Solid application
is essential

Real Estate Financing:

In the real estate market, much has changed over the years. Major banks have largely withdrawn, and many new opportunities have arisen for alternative financing from real estate financiers. Successful financing stands or falls with a well-written application.

What is real estate financing?

In this case, real estate financing, or property finance, is the funding for a commercial building, office, concourse, or rental property. We are explicitly not referring to a “mortgage” for a home for your own use.

When we talk about real estate financing, we must immediately distinguish two forms:

  • Commercial real estate financing
    Commercial real estate is usually referring to houses or apartments intended for rental (so-called residential real estate). Business premises rented out to third parties are also included. The Dutch commercial real estate market is characterized by a rather large number of specialized real estate financiers, especially after the large banks have mostly withdrawn from this segment due to the strict Basel III and Basel IV standards. Read more about Basel IV here.Two things are essential with this type of real estate financing:
    • Value of the collateral
    • Financial stability of the tenant
      With commercial properties, the latter is particularly important. On the other hand, with residential real estate, the emphasis is on the ratio of the amount of financing to the property’s market value, the “loan to value” or LTV. As an investor, you need to make your own financial contribution, and buying an investment property without your own funds is impossible. The maximum Loan To Value is currently about 85% This means that if you wish to buy a property for a total purchase price of € 1,000,000, you must contribute € 150,000 yourself. The maximum term of a property financing is sometimes as long as 30 years for residential properties, whereas it often does not go beyond 20 years for commercial properties. The interest costs depend on the Loan To Value, and the higher this is, the higher the interest rate.
  • Financing real estate for your own use
    Financing real estate for personal use, such as business premises for a production company or office premises for an ICT company, is an entirely different story. This also includes business premises leased from the entrepreneur’s holding company to the operating company. With this form of real estate financing, the company’s payment capacity or cash flow is the most critical factor. The lender will particularly assess whether the buyer and user of the property can meet the interest and repayment obligations of the loan for the longer term.
    This form of real estate financing is always considered in conjunction with the rest of the company’s financing. Therefore, financing real estate for own use has traditionally been the playing field of general banks. Yet more and more new players are entering this market. These include crowd funders, direct lenders, and peer-to-peer platforms that directly link investors (lenders) to entrepreneurs (borrowers).

The added value of Xolv Finance

Both forms of real estate financing mentioned above require solid market knowledge. We at Xolv Finance like no other know what the possibilities are, what conditions the providers of finance have and how an application is written so that the provider will approve it.

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