I was sitting with an RBC mortgage specialist today who is also a good friend of mine. We were discussing the woes of life and catching up on industry news and market changes. He mentioned to me that he didn’t realize that commercial mortgages required so much time to not only get approved but to get funded. He specializes in residential mortgages and passes commercial mortgages along to a colleague who specializes in commercial mortgages. In the last referral he made it took a few months just to get the paperwork together.
Sometimes it is helpful to know some basic pieces of information before you contact a bank, lender or broker seeking a commercial mortgage. The following are three very simple things to know about commercial mortgages that will hopefully steer you in the right direction.
Land banking, land development, land servicing all continue to be tough deals to get financing for. Banks and lenders are happy to lend you the money if you have enough pre-sales (of completed lots) to cover up to 100% of their loan. Private lenders have too much land sitting in their portfolio and don’t have an appetite for anymore. Continue reading “Land still tough to finance”
Two calls in a row this week have come in from borrowers that feel very frustrated with the lack of service being given to them from other lenders and other brokers. It would appear that the amount of financing they are seeking is too small for a corporate banker to review and too large or complicated for a bank branch to review. One client advised that they had a residential mortgage broker looking to get them financing and they had been waiting 4 months for an answer.
As a borrower it is important to understand what it is you are looking for. The easiest place to start is to determine what the loan to value of your request is. For example, if you are purchasing a property for $150,000 you should have at least $52,500 available for a down payment (or 35%). Banks and lenders may not actually require that much as a down payment however when talking to a bank or broker you should let them know how much you have and how much you are looking for. Then proceed to ask them about the last few deals they did and how much down payment or equity the borrower had to have. If you are simply looking for answers or direction be very specific about what you need.
Banks and brokers will tend to look at a deal and keep asking for paperwork until they know they have a deal. This happens because financing requests can be structured in a variety of ways to get the borrower what they need. Unfortunately banks and brokers don’t always get the right information upfront and it can be very frustrating as a borrower to wait while they figure it out. Don’t despair – just put time frames around your request so that you can move on to the next person if your needs are not met.
If you have a transaction you would like some direction on, please do not hesitate to email email@example.com or visit www.bridgecap.ca/dylan
We had the opportunity to work with a business owner that was looking to make better use of the money they spend on rent by purchasing a small industrial bay. The business was spending approximately $13.00 per sq. ft. on rent (not including operating costs) and was able to purchase a unit in a warehouse for $9.00 per sq. ft. The business was paying almost $1,900 per month in rent and by purchasing the unit the mortgage payment is almost $1,400 per month. A savings of $500 per month and the business is building equity as the mortgage is paid down and the property value rises over time. The business has been operating for more than 10 years and expects to operate for at least another 10 years which means that they are now making better use of the money being spent to have a location. If you own a business and are interested in understanding the options your business might have, please email firstname.lastname@example.org for more information or visit www.bridgecap.ca/dylan