Things To Consider When Looking For A Commercial Mortgage
Many commercial property owners are looking for loans to help them to meet their financial requirements. Lenders of both residential and the commercial mortgage industry have become cautious when approving mortgage loans. Today, the mortgage market is hit with bad debts and lenders are willing to give loans only to people who have excellent credit rating and who have the cash flow to repay the loans. The credit situation is expected to tighten further, which will make it even more difficult to get commercial loans.
This will put the consumers in a difficult position, as they will find few resources to finance their requirement. If the bank does not approve a loan, then finding a new lender that will finance specific requirements, will become difficult.
There are several factors that you have to consider when applying for a commercial loan. There have been instances in the past where high interest commercial loans have shut down businesses. So you must be careful when dealing with the lender. You must be able to trust the lender with whom you are mortgaging your property.
If you are looking to get a loan on your commercial property, then you need to ensure there is enough equity in the property to be eligible for a loan. Most lenders may not be willing to take the risk of giving a higher loan, than the market value of the property. If you are having trouble with other lenders or the tax department, then getting a loan will become even more difficult and expensive.
The commercial mortgage industry is unregulated when compared to the residential mortgage industry. There are many mortgage brokers who will try to get you a loan from unscrupulous lenders in order to get a good commission.
Some brokers will give a letter stating that a pre-approved loan has been sanctioned to your account. The pre-approval letter will give a false impression that a loan has been approved and you will receive the loan amount once you submit the papers. This pre-approved letter is a tactic used by the broker to ensure that you don't go to any other broker to get a mortgage loan. There are many brokers who charge a fee for finding lenders who are willing to give you loans at low rate of interest. These brokers take their fees and make no effort to find the lender that can meet your requirements.
If you have found a lender who is willing to finance your requirements, make sure you get a Letter of Interest from the lender. There is no point getting a letter of interest from your broker, as the broker has no authority to give a letter of interest. The broker is not going to lend you any money and cannot give you a letter stating that your loan has been pre-approved. Most lenders will ask for an upfront payment to make reports and to conduct appraisals, which are usually refundable.
Getting a commercial loan is difficult, however if you can find a good broker the process of getting a loan becomes easier.
by: Lawrence White