Thursday, June 7, 2012

Financing the Purchase - Considering the Mortgaging Options

Understanding the mortgaging options available to you for a commercial property acquisition, should be considered even prior to looking at real estate possibilities. A pre-qualifying meeting with a commercial lender and/or a mortgage broker specialist, is a great place to start.

Although certain specifics cannot be necessarily determined (ie. the actual property is likely an unknown at this point) -- you can still determine loan to value requirements, rate/term/amortization criteria and other specific details (a.k.a. – costs), which you will encounter in arranging the mortgage. You can also allow the lender to approve of you or your company, based on credit rating, financial standing, and overall covenant.

When considering where to look for financing, one size does not fit all, and especially in commercial lending. But some of the better options might include:

i) Your Primary Bank (established relationship & they know you)
ii) Institutional Lenders specializing in commercial lending
iii) Mortgage Brokers (willing to shop the market for you)
iv) Private Lenders (often for restricted situations and generally costlier)
v) Seller Financing (often available and could be via 1st or 2nd Mort.)
vi) Assuming Existing Financing (subject to an approval & re-qualifying)

Beyond the basic mortgage terms you are looking to obtain, make sure you review the costs associated with arranging it. In addition to any legal/administrative fees as charged by the lender, there may be additional mortgage brokerage, appraisal, and inspection fees which you will be subject to as a condition of funding. All of this should be clearly spelled out in a written “Mortgage Commitment" document and as provided by your lender. If you have any doubts or questions at this stage regarding the Mortgage Commitment, consult your lawyer. Obviously, any unwillingness to advance mortgage funding on the part of the lender, will affect your ability to close the transaction.

Again, seek out experienced commercial realtors within your market to guide you in the area of mortgage financing and to help you find the most suitable lenders for your purchase.

No comments:

Post a Comment