Even for nationally recognized lenders, they can have very different underwriting rules and rates for each of the different regions they operate in.
Most of the reasons for this relate to competition and risk which are also related to each other.
Let me explain.
The more risk any particular market is deemed to have, the less competition that will exist. For commercial property markets, the biggest risk to a commercial mortgage lender is a low volume, long sales cycle commercial resale market. In these areas, there has to be a greater lending focus on the more localized factors that are going to make or break the underlying business that’s servicing the debt as the security by itself does not provide as much comfort to lend money being that its hard to know when a lender pay be able to recoup their principal from a foreclosure action and how much they might get back when the dust finally settles.
A thinly traded market also tends to suggest lower amounts of commercial properties requiring financing, and still lower amounts of similar commercial properties being offered for mortgage security.
As a result, the harder the market is to operate in with respect to risk management, the fewer the players will be with respect to those that issue commercial mortgage financing facilities.
For the lenders that do service markets with lower levels of competition, the cost of borrowing is likely going to be higher than in a more competitive market.
Taking it one step further, regional commercial mortgage lenders can also be more stringent in terms of what they are prepared to finance and the terms they are prepared to offer because they know there isn’t going to be much alternative competition to what they are offering.
The tighter financing options available will also impact the cost of real estate as buyers will only be prepared to purchase properties where sufficient leverage can be provided.
The opposite is going to be true of larger metropolitan areas where active resale markets and higher levels of overall economic activity reduce lender risk which in turn increases competition for available commercial financing opportunities.
So unless your target property is located in or near a major economic center, there is a good chance that commercial financing will not only be harder to locate and secure, but the rates will be higher and terms more strict that what you could expect in other areas of the country, from the same or different commercial mortgage lenders.
If you’re in need of commercial mortgage financing, I suggest that you give me a call so we can go over your requirements together and discuss different commercial property financing options that may be available to your in your market area.
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