Commercial mortgage loans allow investors and business owners to buy owner-occupied, as well as income-producing, commercial properties. The duration of commercial real estate loans vary, having terms between few months to 25 years, and the fees and interest rates can be just as varied. Borrowers should know the type of commercial loan can also affect the types of properties that lenders can finance.
When seeking commercial mortgage financing, you will first want to know if you qualify. Mortgage lenders will review a plethora factors in order to determine if you qualify for a commercial property loan, including:
- Property value
- Loan-to-value ratio
- Debt-service-coverage ratio
- Net worth
- Credit rating
If you want to get the best rate, you need to discuss the many loan terms with your commercial mortgage lender and or Broker. Some important questions you need to consider include:
- Is the rate fixed or adjustable?
- Are you looking for a short-term loan or long-term permanent financing?
If you want the best rate, consider these factors that lenders look for when determining commercial mortgage rates.
- Property Location – Many lenders prefer large metropolitan or suburban areas. Lenders consider loans in rural areas risky because these properties are harder to rent.
- Lease Terms – Are the tenants signed to long-term leases or are the leases expiring shortly?Long term leases guarantee cash flow during the term of the loan. Has lease turnover been low? Again, low turnover suggests a property that is not hard to lease.
- Cash Flow – How is the historical occupancy and cash flow? Lenders like properties with constant positive cash flow and good occupancy history. Major fluctuations in cash flow cause concern for lenders.
- Property Condition – Is the property in good condition or does it need repairs and/or renovation? A property in need of repairs could create a cash drain and affect the ability to pay the mortgage.
Here at Key, we have the expertise to search the market for the best rates and terms to match your circumstances. Please don’t hesitate to get in contact if we can help you with your Commercial Mortgage.