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.
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About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel