Category Archives for Commercial Mortgage
Commercial Mortgages Need More Time
“When You Apply For a Commercial Mortgage For Acquisition, Refinancing, or Expansion, Make Sure You Allow For Plenty of Time To Complete The Process”
When it comes to mortgage financing, a person’s typical frame of reference is the last time they bought or refinanced a residential home. In most cases, a residential mortgage commitment can be obtained in a matter of days with mortgage closing to take place approximately 10 business days after wards.
With commercial mortgage financing its a whole different ball game when it comes to financing with respect to the amount of information lenders need to review and the time it can take to complete the process.
The first thing that can significantly impact time is the availability of business financial statements. Because the financing is for a commercial property, the mortgage repayment will be coming from the business and therefore, the commercial mortgage lender’s repayment assessment will be based on the historical financial statements of the company or business entity.
Many times, companies will wait the full 6 months after a year end to complete their financial statements in order to comply with government reporting requirements. If the business applies for commercial property financing before the financial statements are completed, the process will likely be delayed until they are available.
The second potential problem with repayment assessment is if the business applies 6 months or more after a year end when financial statements are available, the lender may still want an accountant prepared interim statement due to the amount of time that has passed since the last year end.
The process can be further delayed while the business owner is waiting for the completion of lender requested property appraisals and environmental audits. Sometimes a business owner will proactively commission an appraisal and environmental assessment prior to applying for the commercial real estate mortgage to speed up the process.
However, this can actually back fire if the appraiser and/or the environmental auditor are not on the lender’s approved service providers list. If this is the case, then the reports may have to be redone incurring additional costs and further delaying the process.
If there are any outstanding deficiencies or balances due from passed approved building permits, property taxes, site survey, appraisal, or environmental audit, these issues will likely have to be resolved before a commitment can be issued or signed off.
Because of all the requirements and due diligence involved, its also important that you’re applying to the most relevant lender so you don’t end up going through the whole application process and still not get a commercial mortgage approved and funded.
If you have a commercial property you’re looking to acquire, refinance, or expand, please give me a call so I can quickly assess your requirements and provide the most relevant financing options for your consideration.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Ontario Commercial Mortgage Financing For Gas Stations
“What Types of Commercial Mortgage Loan Options Are Available For Ontario Based Gas Stations?”
While there are still some institutional lenders that will look at gas station financing, the majority of banks, credit unions, and term lenders are only interested in gas stations that are relatively new, are under the flag of a major gas supplier, and have at least one strong tenant that contributes to the cash flow of the business.
To qualify with an institutional lender, you are going to also have to have a recently completed phase II environmental report, a commercial property appraisal, contamination insurance policy, and a tank monitoring system.
The institutional requirements will be very high and the time it take to complete the financing will likely take several months due to all the supporting information that will need to be collected or created by third party consultants.
Even the institutional lenders tend to be very geographic specific and will only entertain a gas station financing application if it fits into their portfolio at the time when financing is required.
Needless to say, it can be very difficult, costly, and time consuming to secure an institutional commercial loan for a gas station purchase or refinance.
As a result, the majority of Ontario gas stations are financed by private lenders who tend to be focused on the provincial gas station market and are very well educated into gas station operational risks as well as how to identify a gas station they will consider for financing and how to quickly determine if one is not going to be of interest to them.
Even with private lenders, the environmental assessments, tank condition, tank monitoring, and liability insurance are going to be important as any existing or perceived environmental liability could render their security worthless.
With private lenders that provide commercial loans for gas station properties in Ontario, they have a high degree of focus in their due diligence on the performance of the operating business. The most important statistic that many of them look at is the annual volume pumped by the station. Even if a station has marginal profitability (which could be caused by a number of management issues) as long as the volume numbers are at a certain level for the size and location of the station, the application can get serious consideration from a lender.
Like most private mortgage lenders, the security being offered must be looked at in terms of its resale value. The private lender will not provide gas station financing unless they are prepared to take ownership of the station in the event of mortgage default and are confident in their ability to re-market the security if necessary to have the mortgage repaid.
Similar to other types of private lending, the incremental interest rate can be 4% to 10% above comparable institutional rates, depending on a specific location, borrower profile, and risk assessment.
Private lenders will also tend to make their decisions much faster than traditional lenders and can offer a variety of mortgage commitments including short term interest only, long term interest only, and amortized principal and interest payments.
If you have a gas station mortgage financing need in the province of Ontario, give me a call and we can discuss what types of options are available for your situation.
Commercial Property Mortgage Lenders Staying Cautious
“Commercial Mortgage Financing Is Available, But May Be Harder To Secure Than What You Might think”
Its hard to generalize about the commercial lending market as its so diverse with each slice of the market having its own lending requirements and micro market perceptions to deal with.
But overall, one thing that can be said about the current market is that commercial mortgage lenders are staying on the conservative side of the ledger with respect to issuing new commercial mortgages.
This could also be considered an improvement from 2009 when there wasn’t a great deal of institutional property lending of any type as banks and other traditional lenders either sat on the sidelines or took an ultra conservative approach to lending money on commercial property until they could get a better sense of where the recession was headed.
In the current market here in 2010, there are more borrowers trying to get something done with respect to financing commercial property whether it be for acquisition or refinancing and there are also more lenders taking a harder look at financing opportunities.
That being said, the ability to secure lower cost commercial mortgage rates, especially before interest rates in general are expected to rise, is still a bit challenging and will continue to be that way for the foreseeable future.
And to be clear, its not that institutional lenders have changed their lending policies. Its more about applying them to the letter of the law and taking more information into account when assessing the risk of any one particular deal.
From a borrower’s point of view, this means that larger down payments are expected on commercial acquisitions pushing the average loan to value back to the more 60% to 65% range. Repayment assessments are also scrutinized a lot closer, so if you are trying to finance any type of commercial rental property for instance, it will most likely be a requirement that all units are rented or are virtually at capacity.
For self use buildings requiring commercial mortgage financing, the lending decisions related to lower mortgage rates are going to stick tight to the lenders debt equity requirements and income statement repayment assessment based on historical results.
Prior to the recession hitting, there tended to be some wiggle room on the application of commercial mortgage requirements by underwriters, but that has tightened up considerably since as lenders closely watch their commercial mortgage portfolios to see if they need to tighten up assessment requirements even further.
If you have a commercial mortgage financing requirement, I suggest that you give me a call so I can quickly review your requirements and provide financing options for you to consider.
The Commercial Mortgage Sub Prime Market
Mid Market Commercial Mortgage Options Have Shrunk And Are Still Shrinking
Like the well publicized sub prime residential mortgage tailspin occurring in the U.S., the commercial mortgage sub prime market is also way down to non existent.
The sub prime market is a second tier institutional market that provides funding between traditional institutional lenders and private lenders.
The recent economic turn down has driven many North American sub prime lenders out of business either through failed portfolios, a lack of available funding, or a combination of both.
Sure, some of the bigger players have been provided with well documented bail outs, but even they aren’t issuing a whole lot of new loans these days.
The impact to business financing is considerable in that if you can’t qualify with an “A” lender, which is no easy feat these days either, you can drop right down into private money commercial options as there isn’t much between at the current time.
In many cases, commercial property purchases or refinancing scenarios are having to utilize private mortgage options for one or two years to provide a bridge financing to hopefully better days when the business performance will have increased and the mortgage markets have returned to a closer version of normal.
The biggest challenge business owners are having right now is in not recognizing this change in the market and as a result, they end up spending too much time looking for a type of money that doesn’t exist.
And because of the increased opportunity level for private lenders, its not automatic that a private loan can be secured either.
The commercial version of the sub prime market is likely going to be in disarray for some time to come as more banks in this category are expected to close in the coming months.
The key take aways from all of this are 1) allow more lead time to get commercial mortgage financing in place, and 2) don’t spend too much time looking for money that’s not there right now.
If you have a commercial property financing requirement that you’d like to discuss, please give me a call and we’ll go over the relevant options together.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Commercial Mortgages For Owner Occupied Real Estate Properties
“Even In The Midst of The Recession, There Are Still Excellent Commercial Financing Deals Available To Small Business Owners”
If you have a strong borrowing profile, there has perhaps never been a better time to finance commercial real estate. Bank mortgage deals can be found under five percent, providing a level of debt servicing that’s seldom been seen.
Stronger applications can command loan to value ratios as high as 75%, providing excellent leverage for any borrower looking to acquire a property or a business seeking to refinance an existing building.
And if you’re willing to compromise slightly on the interest rate, you can secure a commercial property mortgage that’s at or near 100% of the property value.
Commercial Term lenders that provide mortgages sometimes have a hard time competing with the Chartered Banks on interest rate, so they offset their rate disadvantage by offering higher leverage for owner occupied buildings.
The rationale from the lender’s point of view is that they are lending primarily on the strength of the business and because the building is owner occupied there isn’t a concern that a core tenant will not renew a lease or that there will be any vacancy rate cutting into the cash flows.
If the business is generating sufficient cash flows to debt service the asset, then the higher leverage on real estate provides greater access to capital at still very reasonable rates.
In some cases, term lenders have claimed to even go beyond 100%mortgage financing of the real estate under very strong borrowing conditions. While this is definitely not the norm, it does show that higher leverage, even at 80% to 95% on self occupied buildings is not only possible but very cash flow friendly.
So regardless if you’re looking for the lowest cost or the highest leverage, there are some great commercial mortgage options available to you and your business.
The key is maintaining a strong credit profile and continually producing cash flow statements year over year that support the debt servicing that would be required.
If you have a commercial property you’re considering buying or refinancing, please give me a call so I can quickly assess your situation and provide you with relevant options to consider.
Click Here To Speak With Joe Walsh, Commercial Mortgage Broker
Commercial Mortgage Applications Require Time, Money, and Patience
“The Commercial Mortgage Application Process Can Be Grueling At Times”
While a residential mortgage process can be completed in 2 to 3 weeks from beginning to end, the same is not true with commercial mortgages.
Residential mortgages typically require a $200 appraisal and the cost of a mortgage registration. For a commercial mortgage the costs can be significantly higher.
Here are some of the main reasons why your search for a commercial property financing will require time, money, and patience.
First of all, a commercial mortgage appraisal can cost several thousand dollars due to more required work, which takes longer to complete. In some areas, there may not be a large number of commercial appraisers available, so there can also be a waiting time of several weeks before they can even get out to inspect the property.
Second, most lenders now require an environmental assessment be performed on any property that they intend to finance. Sometimes existing environmental assessments can be used from past years, but in many cases an up to date environmental report is required. If there are any suspicions of contamination, additional assessment work can be required which will also take more time and cost more money. Like appraisers, it may take some time before an environmental auditor can get out to your property, which can further lengthen the process.
And even if you proactively get an appraisal and environmental audit completed prior to application, there is no guarantee that the individuals or firms you hired will be acceptable to the lender.
Commercial mortgage lenders may also ask for an updated survey of the property where title insurance alone won’t due and a physical survey will need to be completed by yet another qualified third party.
Moving on to repayment assessment, the lender will need to assess the financial statements of the business to see if there is sufficient historical evidence that the applied for mortgage can be repaid without placing a financial strain on the cash flow.
If the existing financial statements are more than 6 months old at the time of application, there is a good chance the lender will ask for updated statements prepared by a qualified accounting firm. More time, more money, and more patience required.
Private lenders don’t tend to have as many requirements for commercial mortgages as institutional lenders, but they still will likely want a commercial appraisal and a recently completed environmental audit, depending on the property and its usage.
The key to getting things done faster for the least amount of cost is to work with a commercial mortgage broker who 1) has access to lenders relevant to your requirements, 2) knows which third party consultants the lenders have approved for service, 3) understands how to project manage a commercial mortgage application process all the way from lender introduction to funding disbursement.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Gas Station Financing
“Gas Station Financing Tends To Be A Very Specialized Form Of Commercial Lending”
Due to the increased focus on environmental issues and the related environmental laws focused around environmental liability issues, there are less commercial lenders interested in financing gas stations now than there were several years ago.
Any financing request, regardless of the lending source, will require recently completed Phase I and Phase II environmental audit reports from a recognized auditing group. If there is a material amount of contamination detected, further levels of testing may also be required as well as the completion of remediation work identified.
Interested lenders are also going to require a commercial appraisal of the gas station which is also a fairly specialized activity that will need to be completed by an accredited commercial appraiser that is acceptable to the lender.
For the most part, gas stations are financed by private sources that have a strong focus in this market in order to properly understand the market risks as well as all the operational issues that need to be taken into consideration when reviewing a request for commercial financing.
Because most of the funds available come from private sources, the mortgage rates of interest are going to be higher as well as the lender fees on closing. So in order for a business to cash flow a higher rate mortgage, it may require a higher owner invest than what you’d typically find in other commercial properties where the mortgage loan to value averages out at 65%.
At the same time, a borrower may still be able to acquire institutional financing if there are loan guarantees or lease guarantees provided by one of the major gas and fuel companies that meet the requirements of a traditional bank’s commercial financing program.
Private mortgages can also be interest only or amortized payments, depending on what the lender is prepared to offer and what the borrower is prepared to accept. For interest only scenarios, a long term financing strategy will need to be developed to refinance the mortgage at some point or pay it out from other sources in order to pay off the principal.
If you’re seeking gas station financing in Ontario, please give me a call and I will quickly review your situation and provide any options that would be available to you.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Land Acquisition Financing
For those of you seeking land acquisition financing where money is required for the purchase of developed or undeveloped lots of land, here are a few basic parameters to keep in mind.
First, there do tend to be several sources for property financing in most areas. The more developed the property and the property location in general, the more land mortgage options will be available.
Land can be purchased for a planned construction project by a home builder or home owner, or for speculative reasons for individuals focused on buying and flipping real estate properties for a profit.
In either case, for residential serviced lots within well developed areas, the loan to value from an institutional lender will likely range from 65% to 75%. If the property has a planned construction project where the construction financing is already arranged, the related financing cost for a bare land purchase can be as low as prime plus one or two from an institutional lender.
If you take the same type of scenario mentioned above, and moved it into a rural area where only well and septic is available, the financing percentage will drop to 50% in most cases.
The private mortgage market also provides funding for bare land purchases with similar leverage requirements. For well developed sites and locations, private mortgage lending rates will start at 10% and go up to around 14% for unserviced land.
Some private lending sources for bare land will require that you have a plan to build in the near term and won’t finance purely speculative purchases while others will if they like the long term potential of the property.
If you’re thinking about investing in bare land for building or speculative reason and will require a land acquisition financing facility, then I suggest that you give me a call so that I can quickly determine your available options and work with you to find a mortgage that meets your needs.
Commercial Property Mortgage Strategies
“When Looking To Secure A Commercial Mortgage, The All Important First Consideration Is The Amount Of Time You Have”
Unlike most residential mortgages that can be closed in 10 business days, a commercial mortgage tends to take longer due to many of the different lender requirements that can come into play. More specifically, commercial property loans can require updated appraisals, environmental assessments, title surveys, building inspections, business financial statement reviews, to name the most common areas of assessment.
While these areas may also be covered off for residential home purchases, the equivalent processes with commercial properties tend to be more involved and take longer to complete.
When the buying opportunity is for a property that isn’t long for the market, the time lines for closing will be shorter, making optimal or ideal financing difficult and perhaps impossible to locate and secure before time runs out on the offer to purchase.
If the property is a great buy or is an ideal fit for your business and too good to pass up for whatever reason, you may want to reconsider your property financing strategy.
Remember that the goal is to complete the purchase and if financing is going to be required, then you have to focus on sources of commercial mortgage financing that will work with your time requirements.
And even though it may cost a bit more in fees and rate in the short term, a private mortgage may be the best approach to make sure time doesn’t run out on the deal.
While private mortgage lenders may require many of the same third party reports, they may also consider reports that are already available even though they may be several years old if the lender is comfortable they still represent the subject property. And because you will be dealing with typically one person versus an entire organization, the speed to assess and generate a financing commitment will be much faster.
This is not to say that you should abandon seeking a long term low cost commercial property loan. The economics related to the property may require the ability to eventually secure more optimal financing over time. But once again, the key is to get the deal closed, so after that’s out of the way, there will be plenty of time to search for the best possible solution.
On the one hand, this private bridge loan strategy is going to cost you more money in the short run, but this may actually be offset over time if a less rushed approach to looking for best fit mortgage financing results in options that would not have likely been discovered in the rush to close the deal.
If you’re in the process of purchasing a commercial property, I suggest you give me a call so that we can identify the options you need to be focusing on to get any potential deal closed on time.
Click Here To Speak To Commercial Mortgage Broker Joe Walsh.
Self Storage Property Financing
“Self Storage Property Financing Options”
Self storage facilities are a growing market as the population increases and retains more stuff in the process.
Because of the cash flow potential and resale market for these types of properties, there are several different types of commercial property financing sources available to property owners.
Perhaps the hardest type of self storage financing is the actual construction and development of a self storage facility. A new facility typically sees the borrower entering into a new market. Lenders may become very concerned about proper location and marketing strategy which can create some difficulty for the prospective borrower to find and secure construction funding.
For existing self storage properties with good capacity utilization and cash flow, the commercial mortgage market is very strong. Excellent rates can be obtained for well established and highly utilized properties.
Financing challenges can occur for self storage properties where there is a residence incorporated into the design and layout as the resale market will likely be significantly lower for this type of setup. Anything that complicates liquidation of the underlying security tends to directly impact a potential lender’s interest in the financing opportunity.
For self storage facilities that do not qualify with institutional lenders, there is an active private lender market for this type of property. Especially in larger centers, private lenders many times will look at these properties as good potential investments and in the event that the borrower is unable to repay the private loan, the private lender may decide to self purchase the property for its long term cash flow potential versus selling the property in the open market to recoup what’s still owing on the mortgage.
Like most commercial properties, the financing options are reduced for rural areas. Basically remote locations will see fewer lenders interested in providing a commercial property mortgage.
The key to more mortgage options and better rates is solid cash flow and high facility utilization. Locations that have room for expansion on site and are situated in markets that will allow for growth will also be garner a lot of interest from traditional lenders that typically provide the lower interest rates.
If you’re looking for self storage financing, I would suggest that you give me a call so I can quickly assess your options and work with you to determine the best course of action for finding and securing a commercial mortgage for the property in question.
Click Here To Speak With Joe Walsh, Commercial Mortgage Broker
Warehouse Mortgage Financing
“The Ins and Outs of Warehouse Mortgage Financing Programs”
Warehouse financing is another type of commercial mortgage application.
The process for financing a warehouse has changed recently with more lender requirements in existence today than just a few years ago. The lending rules have changed so much that an existing warehouse property that has carried a commercial mortgage for many years, may no longer be able to secure a comparable new mortgage under any conditions.
This is largely due to feature requirements and environmental requirements of commercial mortgage lenders.
As an example, to get the lowest potential interest rates for a new warehouse project, the building may need to have 18 foot doors, dock height receiving bays, and 25 foot ceilings. These feature based requirements are driven by what is required by the resale market. Without these features in place, the security value of the property is not only lower, but the time for resale is likely going to be higher. With these market dynamics in mind, many commercial real estate lenders have adopted these types of requirements to strengthen their security positions.
This is not to say that a commercial mortgage would not be available if a warehouse was constructed without certain features, but it could eliminate lower rate lenders from the picture and cause the property owner to seek higher risk, higher rate financing alternatives.
For existing warehouses that don’t include certain features, a mortgage refinancing of any sort may be out of the question with many commercial lenders unless the owner invests in upgrades that will bring the building into compliance with the lenders requirements.
Another mortgage requirement that has expanded in recent years is successful completion of an environmental audit. Once again, existing structures with a mortgage in place may not be able to qualify for a similar mortgage today due to the changes in environmental standards.
This can become a financing barrier for the purchase and sale of existing facilities where the property is unable to pass an audit conducted by qualified third party environmental consultant. The resulting remediation work that can be required to pass the audit may be substantial and time consuming, leaving the owner unable to sell the property before completion.
Environmental audits will focus on the use of the property over time by its tenants. Activities that can create environmental issues will create greater scrutiny in the audit process.
The result of these and other lender requirements has made the process for getting a commercial mortgage for a warehouse property considerably more challenging. Like most commercial financing applications, the services of a commercial mortgage broker can prove to be invaluable in locating and securing the property financing required.
If you’re seeking warehouse financing, I would recommend that you give me a call so that we can work through your requirements together and determine the best approach for securing a commercial property mortgage.
Click Here To Speak Directly With Commercial Mortgage Broker Joe Walsh
Mortgage Financing For Office Buildings
“Mortgage Financing For Office Buildings Can Be A Challenging Form of Commercial Mortgage Financing To Secure”
Office building mortgage financing is strictly considered to be commercial financing.
There is no mortgage insurance available for this type of mortgage loan like that provided by the Canada Mortgage And Housing Corporation (CMHC) for residential properties.
As a commercial mortgage opportunity, the average debt to value leverage that borrowers can expect to secure is 65%.
In smaller centers where there is less of an active resale market, the loan to value amounts can drop to as low as 50% for interested lenders. And in more well established markets, the loan to value can go as high as 75%.
Outside of the market location, the other factors that contribute to the type of leverage and rates a prospective borrower can secure include the age and condition of the building, the quality of the leases, and the overall net cash flow generated.
Office buildings that have long term leases provided by triple A type tenants will attract better and more aggressive offers from commercial property lenders. Lenders will also look at the matching of lease terms with interest terms. When existing leases are for a shorter period of time than a requested lease term, the amount of leverage provided may be reduced as the lenders will typically look at this as a higher risk scenario.
Basically, the longer the lease terms in place for credit worthy tenants, the more and better commercial mortgage options a borrower will have.
Building age and condition will also be closely assessed by the lender. In certain cases, lenders may even require repair or improvement work to be preformed before a commercial mortgage can be granted.
And while the quality of the leases is very important, the net cash flow is what will determine if higher levels of leverage are attainable for properties that are strong in all other lender assessed areas.
While triple A tenants provide a strong sense of cash flow security to a commercial mortgage provider, they can also use their strong credit status to negotiate lower rates. In the end, the lease rates will dictate the level of net cash flow that can be obtained, so borrowers looking for the lowest rates and highest leverage need to make sure they are going to meet the debt servicing requirements of their target lenders before committing to any below market lease rate in order to attract certain high profile commercial tenants.
If you have an office building that needs to refinance its existing mortgage, I recommend that you give me a call so that I can quickly provide you with a free assessment of your commercial mortgage options.
Click Here To Speak To Joe Walsh, Commercial Mortgage Broker
Condo & Townhouse Development Financing
“Key Things To Know Regarding Condo And Townhouse Development Financing”
The mortgage financing for a condo or townhouse development project can become complex largely due to all the requirements related to getting condo status and the specific requirements for financing imposed by certain lenders.
These projects basically start out as a townhouse development regardless of the long term intent for use as condo status cannot be achieved until the end of the building process.
So while commercial lending sources are going to require a certain percentage of unit pre-sales to even consider the a project for a development loan, the building is still going to be viewed as a number of rental units on one title to start with.
This directly impacts the valuation of the project for the purposes of establishing the fair market value of the underlying security. For instance, a rental unit complex may be valued at $200,000 a unit while a condo unit from the same complex may be valued at $500,000 a unit.
Even though the lender, builder, and owner may all agree that the end use will be for condos, until the condo status is obtained, the project will still be valued as a rental complex.
This has a significant impact on the leverage that can be provided for construction and development in that the owner will not be able to borrower as much against a rental market valuation versus a condo market valuation.
The second major challenge with financing these developments is the requirements of the lender, most specifically the qualification of the project’s builder.
For some institutional lenders, the related builder must be on the lenders pre-approved list. If a project comes forward seeking financing where the builder associated with the project is not on the builder list of the lender where application for financing has been made, there is a very good chance that the application will be denied unless a qualified builder is chosen.
Traditional banks only service a small percentage of this market. Some of the other sources of mortgage financing include credit unions, pension funds, private investment funds, and mezzanine funds. Mezzanine financing provides a source of equity to the borrower’s corporation which allows for increased debt financing.
If you have a condo or townhouse development that requires mortgage financing, I recommend that you give me a call so that I can go through it together and develop potential options that will meet your requirements.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Commercial Mortgage Refinancing
“There May Be Several Commercial Mortgage Refinancing Scenarios To Consider For Your Property”
Sometimes lost in all the discussion surrounding the refinancing of a residential mortgage is the opportunities that may exist for commercial mortgage refinancing.
Similar to residential property refinancing, there are three basic reasons to consider getting a new mortgage written. First, you want to see if you can reduce your overall cost of borrowing by locking in lower rates. Second, you have a need in your business for incremental capital and want to use commercial loan refinancing as a way to leverage your equity. And the third scenario is a combination of the first two where you’re seeking both incremental capital and lower overall rates.
While the motivations may be the same, the process of achieving these results is typically going to be more complicated and costly. Remember that commercial appraisals can cost significantly more than residential appraisals. Add on the need for things like updated environmental reports and updated surveys and the administrative costs for refinancing will be higher.
Another thing to consider is the difference in rate movements that can exist between the residential and commercial markets. First of all, commercial rates are higher based on the higher level of perceived risk for financing a commercial property versus a residential property. This can result in higher prepayment penalties on the same mortgage value.
Even though 2009 and 2010 has seen record lows in interest rate levels, commercial rates have not reflected this as much as residential rates, providing a less of an opportunity for rate savings in many cases.
Regardless of the higher level of complexity or the added costs that you may incur, like any refinancing exercise, commercial mortgage refinancing is about crunching the numbers to see if a refinancing strategy provides a net benefit to the borrower.
This process is likely going to be more complicated to complete which is why you should utilize the services of a commercial mortgage broker to work through the numbers for any scenario you may be considering. Its not hard to incur unnecessary costs in this process, especially if its something you’ve never attempted before.
As a first step, I recommend that you give me a call so that I can quickly assess your situation and then go over the available options with you to determine the best course of action or non action.
With commercial mortgage refinancing, many times the numbers don’t work out which is why its so important to go through the assessment exercise and avoid any unnecessary costs.
Click Here To Speak Directly With Commercial Mortgage Broker Joe Walsh
Mixed Use Commercial Mortgage
“Here Are The Basics For Mixed Use Commercial Mortgage Financing”
Mixed use commercial mortgage financing applies to any property is zoned and utilized for both a residential and commercial purpose.
The most common example of a mixed use property is building with a retail store and apartment units.
While these types of buildings exist in large numbers there can still be real challenges in finding and securing a mixed use mortgage.
For starters, this type of commercial property typically does not get financed above 65% of the purchase price or appraised value of the property, whichever is less. Yes, there are definitely cases where the loan to value can go as high as 75%, but there are even more situations where the loan to value is no greater than 50%.
So the equity portion required to get financing in place can be significant and a barrier to mixed use financing.
In terms of sources of financing, the chartered banks will fund mixed use property applications, but mostly at overall mortgage levels above $250,000.
From an institutional point of view, Credit Unions tend to have the ability to consider lower dollar mortgage requests for mixed use, but even then, the loan to value can still fall into the 50% to 65% range. The benefit of credit unions is their regional focus and knowledge of the local markets they serve which provides them with a greater insight into the resale market for mixed property applications from their lending area.
Trust companies also participate in this market, but on a relatively small and selective scale due to the regulatory requirements that restrict the percentage of mixed use in their overall lending portfolios.
The challenge for institutional lenders is the lack of any mortgage insurance programs for this type of financing and large risk spectrum associated with mixed use properties.
Private lenders will also provide mixed use mortgages with terms ranging from 1 to 3 years. Private rates will be higher, but in many smaller centers where traditional lenders are not interested in smaller value buildings, the private financing sources can be the best choice available.
Even when an institutional lender is prepared to entertain an mixed use application, the requirements for financing can be extensive and the application of lending criteria rather unpredictable.
This is definitely an area where a good commercial mortgage broker can add some real value to the process of locating and securing mixed use financing.
As I first step, I would recommend that you give me a call so I can quickly assess your situation and provide you with potential options that we can go over together.
Click Here To Speak Directly With Commercial Mortgage Broker Joe Walsh