Donna Elizabeth Lewczuk asked:


(c) 2008 Donna Elizabeth Lewczuk

Commercial mortgages are available through banks, commercial mortgage companies and private lenders. Commercial mortgage rates vary as widely as residential mortgage rates. Traditional banks offer some very low rates. However, due to their restrictive lending criteria, they are prevented from making commercial mortgages for many kinds of commercial properties. Gas stations, with or without convenience stores, for example, can be difficult to obtain commercial mortgages for. Commercial mortgages can also be difficult to obtain from traditional banks if you don’t have excellent personal and business credit scores.

Hard money commercial mortgages are also available through private lenders. Unlike traditional banks, private lenders have more flexible lending criteria. Also known as hard money lenders, private commercial mortgage companies focus more on the current value of a commercial property than on your personal financial package.

Private lenders are often able to fund a commercial mortgage if there is a clear picture of how the loan will be paid back. When determining whether to fund a commercial mortgage, private lenders will often look at the ratio of income to operating expenses. Unless a borrower has repeated defaults and bankruptcies, private lenders are not as concerned if the borrower has less than perfect credit.

When applying for a commercial mortgage, be prepared to provide your commercial mortgage company, be it a bank or a hard money private commercial mortgage lender, with the following:

- A completed standard commercial mortgage loan application, which includes a personal and business balance sheet

- A description of the use of proceeds of the commercial mortgage you are seeking

- A description of the property

- The current value/purchase price of the property

- The cost of improvements you will make to the property

- An estimate of the property’s value after improvements

- A repayment plan for the commercial mortgage/hard money loan

- For a hard money loan, provide an exit strategy for the commercial mortgage

- will you refinance this commercial mortgage with a traditional bank after making improvements or alterations to the existing property or some other scenario?

Owners considering a commercial mortgage refinance will find many unique loan programs. Specialists of commercial mortgage refinancing offer some of the best loan options available, most of which local banks simply don’t have. Refinancing your commercial mortgage is not an act exclusively reserved for the time your commercial mortgage matures. There are some great reasons for refinancing your commercial mortgage prior to this (see the article “Why a Commercial Equity Loan”).

Now, given the current the state of the capital markets its more important than ever to work with seasoned professionals. Lender guidelines and underwriting parameters are changing rapidly as banks try to protect themselves. Options for commercial mortgage refinances, though still broad, are getting harder to determine and close. Just as important it is key to know not only which lenders are offering the lowest rate and fees but which are still actively funding loans. A good, seasoned mortgage professional will know who these lenders are.



TUMBLIN

Donna Elizabeth Lewczuk asked:


(c) 2008 Donna Elizabeth Lewczuk

Private hard money lenders are in the business of providing loans and loan services to people who require hard money loans (loans collateralized by real estate.) Private hard money lenders may be direct hard money lenders or brokers of hard money loans. Most private hard money lenders are, in actuality, brokers. Some private hard money lenders are both brokers and direct lenders. In these cases, the private hard money lender generally funds one or up to a few small loans per year and serves in the broker capacity to clients for the loans they help to originate.

Deciding on whether to work with a hard money broker or a private hard money lender is similar to deciding on whether to purchase real estate with the assistance of a broker/agent or whether to make an offer direct to the seller on your own.

The advantages of working directly with a true private hard money lender are immediately evident: You may sometimes save money by going direct. Brokers are paid for their services via a percentage of the points you pay on a hard money loan. Therefore, the more brokers involved in a deal, the more you are likely to pay in both points and percentage to accommodate that cost.

If you have selected a direct hard money lender who is a good match for your project, you will be able to speak directly with the decision makers, avoiding the ‘run around’ that so many hard money borrowers fall prey to. You are told that your loan is going through, only to hear the next day that the lender has elected not to take on your hard money loan and now your loan is on another desk in yet another direct lender’s office - or worse, on the desk of another broker who may know a broker who knows a lender who may want to fund your loan. Sometimes, the choice of direct lender is based more on the commission the broker will get than on your best interests.

By working with a direct hard money lender, you can avoid the ‘run-around’ and may be able to close more rapidly. After all, no one knows your situation like you do, no one can explain any extenuating circumstances better than you can, and no one is as committed to your business and your hard money loan as you are.

The advantage of working with a commercial mortgage broker is also clear: a seasoned, well-informed, honest commercial mortgage broker will have the knowledge of and access to the direct hard money lenders in Ontario, Canada, and the United States. A commercial mortgage broker will know where your loan has the best fit. A good commercial mortgage broker will help you ‘package’ your loan to your best advantage, helping you determine how much to expect based on the equity in your property, type of property you are collateralizing, how soon you need to close the deal, and more. A good commercial mortgage broker will be able to assist you through the lengthy application process and submit your loan request to the best direct lenders for your situation. More often than not, working with a commercial mortgage broker will save time. By representing you and presenting your loan request to the best direct lenders, it often makes the transaction run more smoothly and take less time than if you were to take on this task yourself. This often saves you time and trouble in the long run and be well worth the cost of using a mortgage broker.



ALESSI