Investors use the word for almost any loan secured by property. In US lending the distinction that matters is the purpose and the borrower. A business-purpose mortgage is made to an entity, almost always an LLC, for a property held as an investment: a rental, a renovation for resale, or a ground-up build. Nobody in the ownership lives in it.
That combination is what places the loan outside consumer lending rules such as TILA, RESPA and ability-to-repay, which were written to protect individuals borrowing against the property they live in. The glossary lists the regulatory terms.
Business-purpose mortgage to an LLC vs consumer mortgage
| Business-purpose mortgage (LLC, investment property) | Consumer loan to an individual | |
|---|---|---|
| Borrower | An LLC or other entity | A person |
| Property use | Non-owner-occupied investment only | The borrower's own use, among others |
| Underwriting | The asset, its rent or exit, the sponsor's means and experience | Personal income, credit and debts |
| Typical products | Bridge, fix and flip, construction, renovation, DSCR | Long-term personal financing |
| Speed | Term sheet in 24 to 48 hours, close in about two weeks on a clean file | Longer, disclosure-driven timelines |
Why the borrower is an LLC
Lending to an entity is what keeps an investment-property loan business-purpose. It also separates the property from your personal assets and gives the lender a clean structure to underwrite. For a foreign investor the LLC does one more thing: it is the reason no US credit history is needed, since the loan is not to you.
Forming the LLC, obtaining its EIN and opening its US bank account come before closing. A non-resident can do all three from abroad; setting up a US LLC walks through the steps.
The products that fall under the term
Every loan Passy Capital arranges is a business-purpose mortgage to an LLC, from $1M to $5M, on residential investment property of 1 to 9 units. The published maximums are below; exact terms are set in the term sheet.
| Product | Maximum leverage | Term and pricing as published |
|---|---|---|
| Bridge | Up to 80% LTV | 12 months, interest-only, typically 8% to 12% |
| Fix and flip | Up to 90% LTC | 12 months, interest-only, typically 8% to 12% |
| Renovation | Up to 90% LTC | 12 to 18 months, interest-only |
| Ground-up construction | Up to 85% LTC | 12 to 24 months, interest-only on the drawn balance |
| DSCR (rental) | Up to 80% LTV | 30-year fixed from 6% to 6.5% |
What does not qualify
- A property that you or your family will live in, even part of the year
- A loan made to you personally rather than to an entity
- Commercially zoned property and multifamily of 10 units or more, which are placed through the capital-partner network instead; see what we fund
- Loans under $1M
Who uses it
US investors who flip, build and hold through an LLC, and foreign investors who buy US property through one. Both borrow on the same terms. A US investor with a strong personal file still uses a business-purpose loan for an LLC rental, because the property and the borrower are the same kind of thing. A non-resident uses it because it does not depend on a US credit file at all.
The practical consequence is speed and predictability. Because the file is about the property and the plan, a term sheet comes back in 24 to 48 hours and a clean file closes in about two weeks, with the 1% to 2% fee paid at closing and nothing upfront.