Term/Take Out Financing
Term or take out financing is usually a single draw loan facility (sometimes called a land loan) that is used to acquire property, replace existing financing or take advantage of equity in a property. Approval for these loans is usually made on the basis of an appraised value, taking into consideration income generated from the property, if any, and then applying a loan-to-value ratio that, for most chartered banks and other institutional lenders (e.g., life insurance companies and pension funds), often falls in the 60-70% range. Multiple advances are not typically contemplated, unless the borrower needs to complete some unfinished work that affects the property value, or where an income-generating property is not yet fully occupied. Regardless, the lender will often withhold a portion of the loan proceeds (although the loan proceeds sometimes will be advanced for the purposes of calculating interest payments) until the borrower can deliver proof of completion of the outstanding work or evidence of satisfactory new leases having been entered into on terms acceptable to the lender.