Commercial Property Financing Challenges
“Key Things To Consider When Seeking Commercial Property Financing These Days”
At the time of writing, we are in the middle of 2010 and the recent recession continues to play havoc with the capital markets.
From a commercial property financing point of view, it has produced a bit of an odd mix.
On the one hand there is hyper competition for the grade A deals as large commercial property investments will always be a sought after asset for any major lender’s portfolio.
On the other hand, commercial property mortgage financing deals that are just the slightest bit off in certain lender assessment areas are having a hard time getting bank or institutional mortgage commitments in place.
Even for the better deals, the turn around time from application to funding can be several months as lenders work hard to avoid making any financing mistakes. This has resulted in more detailed assessments, more third party verifications, more of just about everything.
The net results are 1) it can be hard to tell who will fund your deal if its not Grade A quality, and 2) its hard to know how long the funding process will take.
This has increases both the supply and demand for private mortgage or non institutional lender financing for commercial properties where borrowers are prepared to pay a little higher interest rate in order to just get the deal closed, get the old mortgage paid out, or secure additional working capital for their business.
Private mortgage financing options also tend to be short term in nature, providing the property owner with the opportunity to continue pursuing a longer term bank or institutional lender solution that will eventually pay out the private financing arrangement.
The hard reality for many commercial property owners is that the path to ideal long term mortgage financing can be a two step process where a short term private mortgage instrument is required in the near term to provide the capital and time required to figure out a longer term commercial property financing option.
This of course leads to additional costs that anyone would want to avoid. But if its either the two step or no step option, paying a bit more through multiple mortgage options in a relatively short period of time is something that has to be seriously considered, at least until the capital markets settle down and things become more predictable.
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