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7(a) or 504?
For a property purchase these are genuinely different deals. People pick 7(a) because it is simpler and then pay for that choice for 25 years.
504 needs real estate or heavy equipment to dominate the project.
The fixed CDC portion. Published monthly.
Side by side
same project, two structures| 7(a) | 504 | |
|---|---|---|
| Cash you put in | ||
| Blended rate | ||
| Term | ||
| Monthly payment | ||
| Fees at closing | ||
| Total cost over the term |
What the table cannot show you
504 is two loans. A bank first mortgage plus a CDC debenture, which means two closings and more paperwork. In exchange most of your rate is fixed for 25 years.
7(a) floats. Simpler and usually faster, but your payment moves with prime. Run it two points higher before you decide.
People regularly choose 7(a) because it is easier and then pay for that convenience for twenty-five years. If the project is mostly real estate, at least get a 504 quote.
Structure 504 assumed 50/40/10
Bank note priced at prime + 1.00 as a conventional first
Indicative get real quotes before deciding