Commercial mortgages are very different from residential mortgages. They have a whole other set of criteria and process to work through.
Unlike a resi mortgage, which looks at your personal 신용카드현금화 creditworthiness, commercial lenders look to the income that the property generates.
This is why many people choose to go through a specialist mortgage broker. They can find the best deals and help with paperwork and negotiating.
Refinancing
The process of refinancing commercial mortgage financing is similar to that for getting a traditional loan, but lenders require more documentation and stricter creditworthiness assessments. Lenders also look at how long the borrower has been in business and whether they have a history of financial trouble.
Refinance loans for commercial real estate come in a few different types. The most common is a traditional commercial refinance loan, which allows you to switch your existing mortgage into one with a lower interest rate and the same repayment terms. You can also get a commercial cash-out refinance, which lets you withdraw equity from the property in the form of a new mortgage.
The lender may also offer a commercial bridge loan, which is designed to help you renovate the property and sell it or secure long-term financing before the current mortgage expires. These loans typically have short terms of two years or less and feature minimal payments or interest-only payments with a large balloon payment at the end.
Conduit Loans
Commercial Mortgage Backed Securities, or CMBS loans, are commercial real estate loans that are bundled together, pooled, securitized, and offered in the secondary market. They are available to borrowers seeking higher leverage and lower fixed interest rates for multifamily properties, self-storage facilities, hotels, office buildings, industrial complexes, warehouses, and retail properties.
Typically, CMBS loans are non-recourse (no personal guarantees) with standard carveouts that protect investors from bad boy behavior. These standardized underwriting requirements make conduit loans popular among lenders and investors alike.
The main drawback of a CMBS loan is that the loans are not serviced by their original lender. Instead, the servicing is outsourced to a master service provider who may not always have a borrower’s best interests in mind. This is why many borrowers choose to prepay through defeasance or yield maintenance. The defeasance process involves swapping a commercial mortgage loan’s underlying collateral for alternative securities, such as Treasury bonds. Alternatively, a borrower may choose to pay the yield maintenance amount based on Treasury rates plus a spread added by their lender.
Traditional Commercial Loans
Traditional commercial mortgages are used to purchase or refinance non-owner occupied property. This can include office buildings, warehouses, apartment complexes and shopping malls. These loans can also be used to make upgrades or additions to existing properties, such as renovating a multi-family building to attract more high-paying tenants.
The application process for a conventional commercial loan requires significant financial paperwork, including financial statements, business plans and tax returns. Lenders also typically conduct an extensive due diligence on the property before issuing a final loan.
Other types of commercial financing include commercial bridge loans, which are used to cover cash flow gaps during a transitional period. They generally have shorter terms than a permanent commercial mortgage. And they usually have higher interest rates than a permanent mortgage. These loans can be found through private lenders and are designed for businesses that may not qualify for traditional financing, such as those with poor credit or those who are flipping properties.
Finding a Lender
If you want to purchase commercial property like office buildings, industrial warehouses, apartment complexes or land zones for commercial use, a traditional commercial mortgage loan may be the best option. These loans are typically offered by banks or other traditional lenders and can have LTVs up to 85%. Borrowers are generally required to have a high credit score and solid business financials to qualify for these types of loans.
The pre-qualification standards for a commercial mortgage loan will vary from lender to lender. Lenders look at a borrower’s lending history, personal and business credit scores, bank statements, income tax returns, business plan and more to determine the level of risk.
The application process can take months since the lender is completing extensive due diligence and reviews of the property, sponsor and legal borrowing entity. Moreover, the lender will charge a number of fees including loan application fees, survey and appraisal charges. These charges can add up to thousands of dollars and should be taken into account when applying for a commercial mortgage loan.