Getting help with your building loan - nursing home financing; include related article on underwriting terminology

Nursing Homes,  Nov-Dec, 1992  by Jeffrey A. Davis

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Underwriting Terminology

Loan to Value he percentage of value a lender can loan Amortization The period of time the loan is being paid

back Term of the Loan May or may not be the same as the

amortization. For example, a five-year loan with a

20-year amortization - the shorter loan term will

result in a lower interest rate - will have to be refinanced

if the borrower decides to pay it back over

the added 15 years. Pre-Payment Penalty The amount a borrower must pay to

pay back a loan earlier than the agreed-upon term Personal Guarantee As additional collateral, most nursing

home lenders require personal guarantees from

owners Coverage Ratio A cushion for debt service. For instance, a

loan with a coverage ratio of 1.0 debt service coverage

would have net income, after all expenses, equal

to the cost of debt service. A loan having 1.4 debt

service coverage would cover the debt service 1.4

times - a cushion, as it were, for cash flow after

payment of debt service. Debt Service Monthly payments, including principal and

interest Loan Constant The total,amount paid each month in

principal and interest

Jeffrey A. Davis is President of Cambridge Realty Capital, Ltd., a Chicago-based financier for health care institutions nationwide. The company has financed some 15 nursing homes and retirement facilities throughout the United States in recent years.

COPYRIGHT 1992 Medquest Communications, LLC
COPYRIGHT 2004 Gale Group