Determining Your Commercial Mortgage Interest Rate
Understandably, one of the first questions we’re asked from potential commercial borrowers is “What will my interest rate be?” But the final interest rate on your new loan will be based on your past credit history, the loan-to-value (LTV) of the property, and other risk components associated with the deal. And before we can provide a valid financial quote we’ll need to work together to build a suitable package for the lender or investor to underwrite. The final rates and terms you receive will be based largely on you – the business owner.
Make sure you understand what you are getting into. Understand your pre-payment penalty in advance. Find out if you can get an interest only loan - if you want one. Find out if your tax returns are required, and if they will be subject to a global cash flow analysis (we have a couple lenders who do not ask for tax filings, and ignore global cash flow issues).
In addition to interest rates there are other factors you should consider if your goal is to obtain the best overall financial package and return on your property as an investment. For example, the terms of a mortgage loan can be just as important as the interest rate. Any pre-payment penalties could also affect the overall cost of your mortgage should you wish to sell or refinance the property. So it’s wise to carefully review the covenants that the lender required on the loan.
Now that you understand how commercial rates differ from residential rates, this is the perfect time to contact us to get started on putting together your deal.