By Jeff Rauth. Email Here or 248 885-8797. SBA Loan Officer at a Bank That Lends Nationally. 15 Years Commercial Real Estate Experience. Past Commercial Mortgage Broker.
Below is an example of a typical commercial mortgage term sheet (aka letter of intent or proposal). Most banks and lenders have similar formats.
234 Main St
Dear Mr Borrower,
ABC Bank (ABC) is pleased to present to you the following conventional loan proposal. The costs outlined herein are estimates. The creation of a legally binding commitment or obligation is subject to the delivery of documents requested by ABC, final approval of the Borrower’s request for a loan, and the execution and delivery of an agreement by both Borrower and ABC to the transactions contemplated hereby, and the consummation of such transactions will be subject to the satisfaction of the conditions set forth therein.
- Borrower: 123 Real Estate Holding Company, LLC
- Lender: ABC Bank
- Guarantor(s): Joe Borrower and any other person or entity as may be required by the Lender.
- Loan Amount: $696,600
- Loan Term and Structure: As represented below:
|Fixed Period||5 Years|
|Interest Rate Reset Frequency||Every 5 Years|
|Amortization Scedule||25 Years, No Balloon|
|Orgination Fee||1% of loan amount|
- Collateral: 1st Deed of Trust on land, building located at 987 Oak St, Omaha, NE
- Equity Injection by Borrower: It is assumed that the Borrower will inject $0 towards the purchase of the property.
- Use of Loan Proceeds:
- Closing Costs: Estimated Closing and transaction costs include a Bank loan origination fee of 1% of the total loan amount, Land & Building Appraisal Fee of approximately $4,000, Environmental report of approximately $650, loan packaging fee of $1,500, and $500 miscellaneous charges. This does not include costs for title insurance, lien searches, attorney fees, etc.
- Prepayment Penalty: Borrower may make principle reduction payment up to 20% of the remaining loan balance annually with no penalty. Principle reduction payments in excess of 20% per year are subject to a prepayment penalty for the first 5 years. The prepayment penalty is 5% for months 0-12; 4% for months 13-24; 3% for months 25-36; 2% for months 37-48; 1% for months 49-60; starting in month 61 the loan may be in full or part with no penalty. This loan is also fully assumable, at lenders sole discretion.
- Insurance: All insurance (title, fire and theft, flood, extended coverage and liability and life) are the responsibility of Borrower. The Borrower will be responsible for maintaining in force property insurance with companies and in amounts and coverage’s satisfactory with the lender.
- Expiration: This proposal shall expire on March 7.
- Good Faith Deposit: $6,000
- Acceptance: By signing below you acknowledge the terms and conditions of this Proposal. Upon receipt of the executed Proposal Letter and accompanying Good Faith Deposit, ABC Bank shall commence its investment approval process including a business, credit, legal and environmental investigation. If investment approval is obtained, the Good Faith Deposit will be applied to the benefit of the Borrower. If investment approval is not obtained, the Good Faith Deposit will be promptly refunded (less the cost of credit verification and investigation and any out of pocket expenses incurred such as appraisal fees, legal fees, etc.).
In the event that ABC Bank approves the loan upon the terms of this Proposal (or such other terms to which Bank and Borrower may hereinafter agree) and the loan does not close within 90 days from such approval date then the Good Faith Deposit shall be deemed earned by Bank. Bank acceptance of the Good Faith Deposit shall not in any way constitute a commitment by Bank to provide the loan described in this Proposal.
This Proposal constitutes only a general, non-binding expression of interest on part of Bank. THIS PROPOSAL IS SUBJECT TO BANK’S CREDIT, LEGAL, AND INVESTMENT APPROVAL PROCESS AND IS NOT INTENDED TO AND DOES NOT CREATE A LEGALLY BINDING COMMITMENT OR OBLIGATION ON PART OF BANK. The creation of such a legally binding commitment or obligation is subject to, among other things, the completion by Bank of an in-depth investigation of the proposed investment, the results of which are deemed satisfactory by Bank and the negotiation, execution and delivery of definitive documents which are mutually agreed upon by borrow and Bank and no occurrence of a material adverse change in business, financial condition, or prospect of borrower or any guarantor. This proposal is provided solely for your benefit and shall not be reproduced, distributed, quoted, or otherwise made reference to except between the senior management, officers and legal counsel of the borrower. Please review and sign and send back to Bank.
Thank you for the opportunity to service your financial needs.
By: Commercial Loan Officer
Agreed to as set forth above: