Even for commercial lenders that do fund strip mall mortgages, they are likely going to be ruled somewhat by the percentage of their portfolio that can be committed to this type of commercial mortgage.
What can then end up happening with these strip mall funding sources is that they are in and out of the market depending on their portfolio mix at any given point in time.
From a leverage point of view, strip malls are typically financed between 50% and 75% of the appraised value of the strip mall, which the lender may want to consider on both a market and income approach to value. The wide range for loan to value ratio is due to the large variability that exists among strip malls including age, condition, location, layout, and so on.
From a cash flow qualifying point of view, most banks and institutional lenders will be looking at a debt coverage ratio of 1.20 to 1.30 (debt servicing requirements divided by cash flow). Debt service will be greatly influenced by interest rate and amortization, both of which are going to vary by the lending funding group looking at the deal.
In the market, the lowest cost form of strip mall mortgage loan financing is going to come from banks and institutional lenders. The next best option from a rate perspective will come from private bankers, investment groups, and other quasi institutional lenders that occupy the sub prime lending space. While the interest rates may be slightly higher, these groups can be slightly easier to qualify with and tend to focus on the applicants that are either just out of the reach of bank financing, or don’t have the time to go through the typically long debt funding process that you will find with most bank and institutional lenders.
As a short term form of strip mall mortgage financing, private mortgage lenders can also be a good source of funds in terms of both speed in getting a strip mall mortgage in place and the flexibility to get out of the private mortgage when other funds are available or lower cost financing can be arranged.
Each strip mall and borrower profile is a unique situation that will have a specific fit in the market place.
To determine where to apply for strip mall financing at any given point in time, applicants should consider the services of a commercial mortgage broker that has access to all the different categories of strip mall lenders in the market place.
If you have a strip mall financing requirement, I suggest that you give me a call so we can go over your situation and discuss potential strip mall loan financing solutions that may be 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