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April 5, 2010

Getting The Best Commercial Mortgage Rate


Commercial Mortgage Loans: Getting The Best Commercial Mortgage Rate

The attempt to get the best commercial mortgage rate is quite understandable, after all, a fraction of a percentage point can make a major difference in the repayments of a larger commercial loan. However, when looking at a competitive price, you should keep in mind that the broker or lender will need lots of information to support the request.

Imagine if you want someone to put a box of a 300-piece puzzle in front of you, show you just ten pieces and say, “Describe the picture for me” – what chances do you have? You may say, “Well, it looks like it is a sunny day and I think I can see part of a tree,” but very little apart from that.

That sounds like an irritating workaround, but the question ” I am looking for a commercial mortgage, what’s the best rate you can bring me?” Is as difficult to answer when a useful answer is expected. Not least because different people have a completely different understanding of what types of commercial mortgages are eligible for a policy rate.

Of course, some brokers offer you a very favorable course “from the top of their head.” This is a bit disingenuous, as each installment is largely meaningless and is probably made in the hope that it will impress the potential client and give him reason to return to them first.

Undoubtedly, the best commercial rates are available only from the mainstream banks, including HSBC, Barclays, RBS, etc., and several other commercial lenders such as The Skipton and Norwich & Peterborough Building Societies.

However, remember, before these organizations consider offering their best rates, they will want very detailed information about the business they are lending to, the people who control the business, and the full details of the property.

In general, the best prices are available only for established companies with a clean credit history and many good and verifiable accounting information. Commercial real estate investors are considered to be good quality candidates, but only if rental income rises. The following points should explain what a lender would look for:

  1. Established Business:Would mean that the business has been profitable for about three years.
  2. Good quality and verifiable accounting information: Accounts professionally prepared by a qualified accountant and, if applicable, filed in the Companies House.
  3. Clean Credit: All existing loans and mortgages are up to date, no late payments to suppliers. No CCJ is either in the business name or the personal name of the individual director.
  4. Investment properties would normally have to have a formal lease with a good quality tenant. Rental income must cover mortgage payments by a healthy margin.

The above points only apply to applicants who follow key interest rates. For companies that can not meet the above criteria, there is now a high degree of flexibility.

As an applicant, when you approach a lender or broker to get the best possible mortgage rate (or a new mortgage), be prepared to disclose all the above information before expecting a reasonable answer. At a minimum, the last three financial statements, brief resumes for each director, a current business plan, and as much information as possible about the property.

There is no doubt that there are some very competitive mortgage rates for the right businesses, and researching the market has never been more important. First, contact your existing bankers, as they are most likely to keep your business, but if you have other options or look for other options, you are in the strongest position when looking for the best mortgage rate.

Michele Thompson
Michele Thompson
Michele Thompson is CEO of Sandhill Finance located in Dallas TX. With over 20 years in finance, she's created a boutique firm specializing in fix and flip and commercial mortgage loans to business owners and investors throughout the country. Sandhill Finance will help you obtain business loans, equipment leasing, and commercial mortgages for your business. As a nationwide broker, Sandhill Finance can finance a wide variety of businesses that want, need, or already own real estate. Sandhill Finance also handles a wide variety of project types, including acquisition, debt refinancing, expansion, and new construction. Follow her on Facebook, Twitter, and Instagram