Regional Commercial Mortgage Disparity
“Depending On Where Your Commercial Property Is Located, There Can Be Considerable Differences in Commercial Mortgage Offerings and Interest Levels”
Commercial mortgage financing, like most everything else, is driven by supply and demand dynamics, most specifically in the commercial real restate market. And its not just the activity level of the market, its the size of it as well. For instance, major economic centers such as Toronto are large in size and maintains a very active market. As a result, there is a large volume of commercial lenders that set up shop or target this market.
Many of the very same lenders focused on the larger markets will also exist in regional markets or smaller markets across the country. But existence or presence in a market does not necessarily translate to a same or similar approach to financing commercial property. More remote markets will end up being serviced by fewer lenders due due once again to the supply and demand dynamics. And because there are fewer lenders servicing the market, the competition among lenders is much lower, resulting in less aggressive rates and terms being offered to applicants.
And when you take into account the impact that the recent recession has had on larger market lenders, the impact is more greatly magnified in the smaller markets with an even higher level of conservatism in place.
In several instances, specific commercial properties will garner to interest, or the interest that is identified may want considerably more equity to be retained in the property during the mortgage term. Small markets for commercial mortgages are for the most part buyers markets where the lenders are the buyers and maintain the power to do what’s in their best interest without worrying a great deal if at all about the local competition.
And when we speak of regional disparity, this can easily occur within different areas of a province and is not reserved only to areas outside of Toronto, Montreal, or Vancouver.
As a business owner, all this indicates that its going to be important to understand the commercial mortgage supply dynamics in your area or area of interest and not to assume whatever knowledge you have of a nearby market is going to transfer to your location of interest. Dealing with an experienced commercial broker is definitely one way to make sure you’re property financing assumptions are on track when you’re considering a commercial property transaction.
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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