Category Archives for Commercial Mortgage
Apartment Building Mortgage Financing
“Apartment Building Mortgage Financing Can Have a Number of Different Applications”
Commercial mortgage financing for apartment buildings, multi family units, and multi residential buildings is pretty much the same thing, just different building and property descriptions.
Apartment buildings with five or more units fall under commercial financing versus residential financing programs.
The biggest challenge for mortgage financing of existing apartment buildings is getting the most leverage for the least amount of cost.
The lowest borrowing rates for multi unit buildings are not available unless the loan to value ratio is no higher than 65%. This ratio will even be lower in less active local and regional markets where the resale market for this type of property may not be as strong.
Higher leverage can be achieved through an insurance backed mortgage like those provided by the Canada Mortgage and Housing Corporation (CMHC), but the cost to insure will also increase the effective cost of borrowing. At higher loan to value ratios, the effective cost of financing can be almost double what you would expect to see from a uninsured mortgage of similar size.
At the same time, many commercial mortgage lenders will not approve apartment building mortgages unless they are insured, reducing the number of available lenders for situations where insurance is not required.
From a debt service point of view, commercial lenders require a net cash flow of at least 1.2 times the annual debt service for the mortgage. Outside of leverage and security, cash flow is the next most important factor to the lending decision.
Historical Income statements are closely scrutinized to make sure adequate operating costs are built into the numbers before debt service is calculated. In some cases, the income statements are adjusted to reflect cost allowances deemed to be absent which can result in the apartment building failing to cover the debt service requirements.
The commercial mortgage lender and/or the insurer can also request that capital upgrades occur before the mortgage can be disbursed. This added cost will typically need to be financed from another source of capital.
Despite the large number of apartment complexes in existence today, commercial financing can be both hard to locate and secure, depending on a number of factors related to the property including but not limited to location, condition, age, and cash flow.
To greatly improve your chances of locating and securing an apartment building mortgage in a timely fashion, I would suggest that you give me a call so we can quickly go through your options and then see if we can outline a plan to get mortgage funding in place.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Commercial Mortgage Brokers
“Residential Versus Commercial Mortgage Brokers’
From a licensing point of view, there is no difference between commercial mortgage brokers and residential mortgage brokers.
The real difference come from the business focus of the individual broker. And while I openly promote everyone to take advantage of the services mortgage brokers offer in general, commercial mortgage financing is much more complex than residential and for the best possible service, you should seek out brokers with significant commercial property financing experience.
Even among commercial mortgage brokers, there can be greater degrees of specialization depending on the type of project or property you’re trying to finance.
While the residential category effectively covers off all single unit residential homes and multi unit complexes less than 5 units, the commercial category covers off everything else.
A short list of commercial property types include Multi Family Units,
Apartment Buildings, Strip Malls, Mixed Use, Condo Development, Construction, Warehouse, Townhouse Development, Subdivision Development, Self Storage, Income Property, Office Building, Land Acquisition, and Land Servicing to name the main categories.
Each category can have its on specific lenders and its own unique financing requirements. So even though a broker may be a commercial mortgage broker by their own description, they may also not have any experience with one or more of these categories.
In selecting a commercial broker to work with keep in mind that the more relevant their experience is to the property type you’re working with, the more value they’re likely going to provide.
The commercial financing process can be quite grueling in comparison to what you may expect from a residential application submission.
Commercial lenders will perform much greater due diligence on the property and the owners that you would expect when financing a home.
Not only can the process be more difficult to navigate, but finding relevant lenders that fit your situation at a given point of time can also be challenging.
Which is exactly why you should consider working with a commercial mortgage broker, and preferably one that has relevant experience working with your type of property requirements.
If you’re not sure about the qualifications of certain individuals, ask for references from past clients, and give these individuals a call to see what they have to say about the level of service they received and their over all level of satisfaction.
Personally, I would recommend that you give me a call so that I can provide you with a free assessment of your options. If I can’t help you, I’ll do my best to refer you to one or more commercial mortgage brokers that are more specialized in your area of need.
Commercial Mortgage Lenders
“Large Number Of Commercial Mortgage Lenders To Choose From”
In the province of Ontario and throughout the rest of Canada, we are fortunate to have a large selection of commercial mortgage lenders.
While there are not as many commercial lending sources and programs as the residential market, there still are several sources to consider.
The biggest challenge in securing commercial mortgage financing is meeting the requirements of any particular lending source at any given point in time. There are many more things that go into the consideration of a commercial morgage application versus a residential application and the resulting assessment and analysis of the information can also become more subjective.
Commercial lenders tend to be regional in nature and even those that support a national organization still will maintain a regional portfolio and regional guidelines for lending. The primary reasoning for this is that the lender security is the underlying value of the real estate which is driven by the local market forces where the property is located. There can be extreme difference in both valuation and market activity for the same type of commercial property in different areas of the country, or even within a large province like Ontario.
Similar to the residential market, there are both institutional lenders and private lenders active in commercial property financing. This is a very competitive market space as both owner occupied and tenanted commercial buildings requiring financing are considered prime mortgage assets by.
From a borrower point of view, another significant challenge with commercial financing is leverage. The average loan to value property ratio is between 60% to 65%. More recently, some of the larger banks have increased their lending parameters to go up as high as 75% loan to value. And still other commercial mortgage programs that are focused on owner occupied financing, boast lending ratios up to 100% of the property value which is still a pretty rare occurrence amongst active commercial mortgage lenders.
Because of the application complexity and the ever changing lender requirements or at least their changing application of lending criteria, commercial mortgage financing is definitely an area where a mortgage expert provides great value.
A mortgage specialist well versed in commercial mortgage lending can not only provide you with greater access to source of financing, but also help you navigate through the complexities of proper mortgage application and closing procedures.
If your looking for a commercial mortgage, or have any mortgage related questions, I highly recommend that you give me a call so that I can quickly assess your options and help you secure the financing you’re looking for from a commercial mortgage lender.
Click Here To Contact Commercial Mortgage Specialist Joe Walsh