Friday, February 5, 2016

Financing The Purchase - "Show Me The Money"

The due diligence is now complete and it's time to make sure your financing arrangements are in place in order to close. Even though you may have had a pre-qualifying meeting at some point along the way, you need to finalize the actual mortgage terms, rate/term/amortization, and costs which will be incurred in arranging the funds.

In considering sources for financing, one size does not fit all, and especially in commercial lending. Some of the better options might include:

  • Primary Bank (established relationship and a lender who already knows you)
  • Institutional Lenders (specialists in commercial mortgages)
  • Mortgage Brokers (able to shop the mortgage market for you)
  • Private Lenders (often in restricted situations and generally costlier)
  • Seller Financing (Vendor or VTB held & either as a 1st or 2nd mortgage)
  • Assuming Existing Financing (based on an approval)

Beyond the actual mortgage terms, make sure you review the costs associated with arranging it. Such costs may include - appraisal fees, application fees, brokerage fees, and associated legal expenses. All of this should be spelled out in a written "Mortgage Commitment" letter by the lender. Best to consult with your lawyer, should you have any question(s) regarding the MC prior to signing it. Any unwillingness to advance funds on the part of the lender, will affect your ability to close the transaction.

A final word on today's mortgage market (as of February 2016). It is highly competitive and with solid investment properties (ie. good cash flow, stable leases, and a solid Buyer Covenant), you should be in a position to actively shop the market. The low interest rate environmental has help expand the number of commercial lenders looking to fund real estate - meaning more sources to select from. By improving the rates/terms, loan to value amounts etc., you only enhance the property itself as an investment.

Tell us about any commercial mortgaging experiences in your market ... and as always we are just a call/click away, if you would like to investigate investment options (OPPORTUNITIES) in Windsor-Essex.

Mark Lalovich
Office: (519) 966-0444
Cell: (519) 259-5434

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