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.
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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