Commercial Property Mortgage Lenders Staying Cautious
“Commercial Mortgage Financing Is Available, But May Be Harder To Secure Than What You Might think”
Its hard to generalize about the commercial lending market as its so diverse with each slice of the market having its own lending requirements and micro market perceptions to deal with.
But overall, one thing that can be said about the current market is that commercial mortgage lenders are staying on the conservative side of the ledger with respect to issuing new commercial mortgages.
This could also be considered an improvement from 2009 when there wasn’t a great deal of institutional property lending of any type as banks and other traditional lenders either sat on the sidelines or took an ultra conservative approach to lending money on commercial property until they could get a better sense of where the recession was headed.
In the current market here in 2010, there are more borrowers trying to get something done with respect to financing commercial property whether it be for acquisition or refinancing and there are also more lenders taking a harder look at financing opportunities.
That being said, the ability to secure lower cost commercial mortgage rates, especially before interest rates in general are expected to rise, is still a bit challenging and will continue to be that way for the foreseeable future.
And to be clear, its not that institutional lenders have changed their lending policies. Its more about applying them to the letter of the law and taking more information into account when assessing the risk of any one particular deal.
From a borrower’s point of view, this means that larger down payments are expected on commercial acquisitions pushing the average loan to value back to the more 60% to 65% range. Repayment assessments are also scrutinized a lot closer, so if you are trying to finance any type of commercial rental property for instance, it will most likely be a requirement that all units are rented or are virtually at capacity.
For self use buildings requiring commercial mortgage financing, the lending decisions related to lower mortgage rates are going to stick tight to the lenders debt equity requirements and income statement repayment assessment based on historical results.
Prior to the recession hitting, there tended to be some wiggle room on the application of commercial mortgage requirements by underwriters, but that has tightened up considerably since as lenders closely watch their commercial mortgage portfolios to see if they need to tighten up assessment requirements even further.
If you have a commercial mortgage financing requirement, I suggest that you give me a call so I can quickly review your requirements and provide financing options for you to consider.
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