Each lender is going to have their own lending criteria, but for the most part, all commercial mortgage lenders that fund office buildings are going to pay close attention to the age of the building, location of the building, and the rent roll or tenant lease contracts in place or expected to be in place in the near future.
For the lower interest rate business real estate loans, lenders are looking to see that the tenant lease terms match up to the interest term being sought. The quality of the tenant can also be very important in terms of their credit and financial stability that will increase the probability that they will be able to pay their rent on time through out the lease term.
Vacancy rate is also a key consideration as well as the marketing plan in place or to be put into place to reduce existing vacancy.
Lender’s will also look at the average market rent for similar buildings and prefer funding deals where the professional building in question is at or very near market rents as well. When landlords provide leases below market rent, there is a risk that if the tenant were to leave that it may be difficult to replace that tenant at market level or even at the discounted level the previous tenant was at, depending on the vacancy level in the building and the space availability in the area.
That all being said, different scenarios will qualify with different lenders and different lender categories.
If a particular application package cannot qualify with a bank or institutional lender, then there are sub prime options that will be slightly more expensive for the most part, but also somewhat easier to qualify for.
And if short term financing is required to complete a purchase or meet a deadline that would not allow the financing process to be completed with an institutional lender even if the borrower would qualify, private mortgage financing can be a good option to get funds into place quickly, providing you with time to arrange your preferred longer term mortgage funding option.
The office mortgage loan financing options you consider will also be a function of the time you have to work with.
For instance any bank or institutional lending deal will require 30 to 60 days to close and its not unusual for the time period from application to funding to exceed 60 days. This is largely due to the amount of third party information the lender will require from the likes of accountants, commercial property appraisers, environmental consultants, and so on. Each of these third party providers will have their own work schedules to manage which can cause delays in getting your requests completed in the time you have to work with.
When the available time is 30 days or less, then private commercial mortgage financing is likely going to be the best option. This is short term financing which typically only covers a term of one year, but can be a key commercial mortgage financing component to acquiring a property, refinancing an existing mortgage, consolidating debt, or funding construction and/or renovation work.
The key to getting an office building mortgage or professional building mortgage in place is focusing in on the right commercial mortgage lenders with a solid information package.
Its easy to waste considerable amounts of valuable time focusing in on lending sources that have a low probability of being able to fund your deal.
In order to increase your probability of success with office building financing, you should consider utilizing the services of a commercial mortgage broker who can help guide you through the market in terms of who can fund your deal at the point of time you require financing as well as putting together an application package that will proactively answer the questions of interested lenders.
If you have an office building or professional building that requires financing either for purchase, refinance, or construction, I suggest that you give me a call so we can go through your situation together and discuss different commercial mortgage financing options potentially available to you.
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