Solid application
is essential

Property finance

A lot has changed in the real estate market over the years. For instance, major banks have largely withdrawn and many new opportunities for alternative financing have opened up with real estate lenders. A successful financing falls and stands with a well-written application.

What is real estate financing?

Property finance, or real estate finance, in this case, is the financing of a commercial building, office, hall or rental property. We are explicitly not talking about a "mortgage" for a home for personal use.

When we talk about property finance, we should immediately distinguish between two forms:

  • Commercial property finance
    Commercial property is usually houses or flats intended for rental (known as residential property). Business premises rented out to third parties are also included. The Dutch commercial property market is characterised by a fairly large number of specialised property financiers, especially after the major banks largely withdrew from this segment due to the stringent Basel III and Basel IV standards. Read more about Basel IV here.

    Two things are important in this form of property finance:

    • Value of collateral
    • Financial soundness of the tenant

      For commercial properties, the latter is particularly important. With residential properties, on the other hand, the emphasis is on the ratio between the amount of financing and the market value of the property, the 'loan to value' or LTV. As an investor, you need to make your own financial contribution. Buying an investment property without your own funds is not possible. The maximum Loan To Value is currently around 85%. This means that if you wish to buy a property for a total purchase price of €1,000,000, you need to put in €150,000 yourself. The maximum term of a property finance offered is sometimes as long as 30 years for residential properties, where for commercial properties it often does not go beyond 20 years. Interest costs depend on the Loan To Value. The higher this is the higher the interest rate.

  • Financing property for own use
    Financing real estate for own use, such as a commercial property for a manufacturing company or an office building for an ICT company, is a completely different story. It 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 ability to pay, or cash flow, is most important. In particular, the lender will assess whether the buyer and user of the property is able to meet the interest and repayment obligations of the loan for the longer term.

    This form of property financing is always considered in conjunction with the rest of the company's financing. Financing property for own use has therefore traditionally been the playing field of general banks. Yet more and more new players are also entering this market. These include crowdfunders, direct lenders and peer-to-peer platforms that link investors (lenders) directly to entrepreneurs (borrowers).

Added value Xolv Finance

Both forms of real estate financing mentioned above require solid knowledge of the market. We at Xolv Finance know better than anyone else what the possibilities are, what the lenders' conditions are and how to write an application in such a way that the lender agrees.

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