Interest Rates
- C-PACE Financing: C-PACE typically offers long-term, fixed-rate financing, which can extend up to 20 years or more in some cases. The interest rates for C-PACE are often lower than those of mezzanine or gap financing, typically ranging from 5.75% to 6.25%. This is relatively competitive compared to traditional mezzanine debt rates.
- Traditional Loans: Traditional commercial loans often have shorter terms with higher fixed rates compared to C-PACE. The rates can vary widely depending on the lender, borrower’s creditworthiness, and loan terms.
Fees
- C-PACE Financing: While specific fees for C-PACE can vary by lender, they generally mirror the costs associated with conventional real estate loan products. The fees are structured to support the ongoing assessment program administered by local governments.
- Traditional Loans: Traditional loans typically have origination fees, underwriting fees, and potentially higher closing costs. The fees can be more substantial compared to C-PACE, especially for loans with shorter terms or more complex structures.
Repayment and Security
- C-PACE Financing: Repayment is made through property tax assessments, which means that the borrower’s personal credit is not at risk. The C-PACE assessment is secured by the property itself, and the debt is non-recourse to the borrower. This structure eliminates personal liability and provides a stable cash flow scenario.
- Traditional Loans: Traditional loans are often secured by a mortgage lien or other collateral, making them recourse loans where the borrower’s credit and assets may be at risk in the event of default.
In summary, C-PACE financing offers a competitive interest rate environment, long-term fixed-rate structures, and lower personal risk due to its non-recourse nature and property-based assessment mechanism. While traditional loans may offer more flexible repayment terms in some cases, they generally require more stringent credit checks and personal guarantees.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-c-pace-financing-compare-to-traditional-loans-in-terms-of-interest-rates-and-fees/
