If you operate or run a business that is looking to refinance a current mortgage, you will find that it is not always easy for you to get a loan that will meet all your existing needs. The same applies to businesses looking to refinance property purchases. Whereas many business owners would love to just walk into a financial institution and request for a business mortgage, the application process is never that easy.
Unless you have a perfect credit score, great revenue avenues, and substantial equity in the form of properties, your chances of being approved for a mortgage that meets your current needs are very slim. In the event that you come across a financier who is willing to finance your acquisition, there is a possibility that the loan terms and rates will not be what you wanted or expected.
You need to have great negotiation skills and knowledge of the commercial loan sector for you to successfully navigate the commercial mortgage processes. You will also need to have lots of connections in various underwriting departments nestled inside lending institutions.
A Commercial Mortgage Broker—Who or What Is It?
Commercial mortgage brokers can be described as trained financial executives who have specialized in providing investor and business options and services to businesses seeking to get commercial mortgages. An investor or business looking for a commercial mortgage can seek out the services of a broker to receive advice on what they need to do for them to get the funding they need.
The work of the broker is to arm the business or investor with information pertaining to available commercial real estate lending options. While at it, the broker will also assist the business in packaging their paperwork in the correct format as well as during the negotiations conducted with the lenders.
Working with commercial mortgage brokers is different as the investor or business owner can be able to access dozens and in some instances hundreds of business lending options. This is the difference between working with a commercial mortgage broker and working with one bank to get a commercial mortgage
Are There Benefits That Come with Working with A Commercial Mortgage Broker?
Knowledge: When you hire the broker to help you navigate the process of funding your next acquisition, it means that you are relying on their skills and expertise to ensure that you will get the best terms and rates possible. The best brokers are those that will take their time to listen and consult with the borrower to understand their desires. After consulting with their client, the broker will then start to review the financial documents handed over to them by the client. The documents will help them gain a better understanding of their client’s current financial position. When the review process is complete, the broker will then take their client through all the options that are available to them. This will include providing an action plan on the way forward.
Expertise: Professional mortgage brokers come armed with a variety of lending options. They will also be in a position to implement a plan that can assist the client to get the best rates and loan terms. They, therefore, will need to have a good understanding of real estate and also have an idea on some of the lending options investors and businesses can use.
Connections: If you want to be successful in getting a commercial mortgage, then you have no other option but to use a renowned broker. Any brokerage firm you choose will need to have many connections and access to a wide pool of lenders. The broker should be able to access more than one lender allowing the financial institutions to compete in a bid to see who will offer the best rates. While having connections is a good thing, there is also a need for the broker to have great relationships with the decision-makers and underwriters at the lending companies. Good relationships with these people will help make sure that any hurdles that may arise easily get bypassed.
Disadvantages of Hiring a Commercial Mortgage Broker
Broker Fees : The fact of the matter is that brokers are only able to make money after charging their clients. This can be in the form of a success fee or through packaging services. Some brokerage companies may ask their clients to pay an upfront fee that can either be refundable or non-refundable. This is in addition to charging a fee that is a percentage of the amount that the client has borrowed. Success fees and upfront fees will normally vary from one broker to the next. There are also those who do not charge the two fees.
Exclusivity Period : Normally, this is not a practice adopted by all commercial mortgage brokers. For those that do, this period is meant to allow them enough time to provide the client with the loan that they need. The borrower can, therefore, not work with any other broker during the stated period. If the borrower is able to gain financing on their own, they will still be required to pay the original broker a certain amount of money at closing.
Lack of Control : When you choose to work with a broker, it means that you do not have any control over where your documents will be sent. Given that there is no rule restricting who they can send the details to, some brokers may even end up sharing your sensitive financial information with venders who have not been properly vetted. This means that there is a likelihood that your information may end up in the hands of your competitors or unscrupulous individuals.
From the description above, it is clear that there are advantages and disadvantages of working with a commercial mortgage broker. If you choose to work with the broker, make sure you know what you are getting into. Also, ensure that you receive as much information as you can pertaining to available lending options that can benefit you.