Things you should question your commercial mortgage broker

A mortgage broker is a person who brokers mortgage loans on behalf of businesses or individuals. Since the market for mortgages have become competitive, the number of mortgage brokers have increased drastically.

Financing commercial property can be confusing when compared to residential properties. They are often subjected to requirements imposed by lenders like banks, as they are usually averse to risk taking. As a consumer, you should take steps to understand all the essential elements of a mortgage program, not just focusing on interest rate. Staying well informed will definitely save money and time during the origination of loan process.

The following are some essential questions every borrower should ask before choosing a commercial mortgage lender.

Maximum amount:

Firstly ask yourself, your current and future capital needs. The more you accumulate cash on hand, the more you will have to invest in your business. Therefore, several borrowers choose higher interest rates to maximize the borrowing amount. You can additionally ask your broker, whether their program allows a second lien mortgage, because 2nd liens can help you in your future capital needs.

Balloon Payments:

The balloons might be useful for residential borrowers and not for commercial borrowers. A balloon loan will literally pressurize you, since it requires a larger than regular monthly payments, usually tens of thousands of dollars. Most of these loans require one huge payment that pays off the remaining balance of the loan. Therefore, it is mandatory to be well informed by your broker regarding the balloon payments for the loan borrowed.

Loan Products:

It is essential that you ask your lenders the type of loans they offer you. Lenders usually provide loans like bridge loans, construction loans and conventional loans. Why do you need to know about this? The more products your lender provides, the better they are for you.

Extra costs:

Researching about the costs associated with the loans that you are going to apply is always beneficial, as it can literally save you thousands of dollars. Inquiring about all the costs including the lender fees, environmental reports, property survey or any other fees associated with your loan can prevent you from surplus expenditures. There are some lenders, who will provide you with better alternatives or will bear all these costs as a whole.

Documentations Required:

Several commercial mortgage brokers require endless amount of documents to be submitted. Operating statements, copies of leases, asset statements and tax returns can be quite challenging. Therefore, ensure that all types of financial documents required are gathered beforehand.

Early Repayment Charges:

Brokers make money from the interest you pay during the life of the mortgage loan. So, if you repay the loan earlier, they won’t be able to gain much profit. Therefore, it is essential to clarify with your respective broker about any surplus charges that you might incur due to an early payment.

Interest Rates:

Interest accrues over the duration of the loan. Therefore, ensure that the rate of interest in which the loan is borrowed is affordable for you. Additionally, inquire whether the advertised low rate claimed is permanent or temporary. Because in many cases, the advertised low rate, usually lasts only during the promotional period.

So when applying for a commercial mortgage loan, you need to remember that there will be huge differences between the various lender programs. Avoid comparing these loans solely based on the interest rate. It is essential that you ask the above mentioned questions to your broker to save your precious money and time.

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