Commercial Mortgage Financing: Commercial Mortgage Broker or Your Local Bank?

One of the most common questions we hear is the following: “Why should I use a commercial mortgage broker like Select Commercial? Why shouldn’t I just go to my local bank?” There are many reasons why using a reputable commercial mortgage broker is preferable to limiting your commercial mortgage request to just your local bank. Here are some of the reasons why:

  • Rate: Many borrowers focus only on the interest rate when shopping for a commercial mortgage loan. A commercial mortgage broker should be able to negotiate great rates for you. In addition, they will be able to negotiate many other terms with which you may not be familiar or experienced.
  • Term: Most banks are only able to offer short term loans of 3-5 years at a fixed rate. After the initial fixed rate the loan will either mature or adjust to a new rate. This does not provide long-term interest rate stability for a borrower. Commercial mortgage brokers are often able to obtain 10-15 year fixed rates.
  • Amortization: Many local banks will limit their amortization period to 20 years. This creates a higher payment and lower cash flow for the borrower. Commercial mortgage brokers are often able to secure 25 year amortization periods on commercial mortgages and 30 year amortization periods on apartment mortgages.
  • Guarantees: All banks will require personal guarantees from the principals. Since commercial mortgage brokers represent many lending sources, they are often able to secure long-term fixed rate loans on a non-recourse basis.
  • Fees and closing costs: A commercial mortgage broker is very experienced in commercial mortgage transactions and will work to negotiate the lowest fees available. Good commercial mortgage brokers have wholesale or correspondent relationships with their lenders which allow them to keep fees to a minimum.
  • Experience: A commercial mortgage broker knows what each individual lender will require and which lender is most likely to approve a given loan request. This experience can save a potential borrower weeks and months of shopping for the best loan available in the market. Commercial mortgage brokers often handle much of the processing and underwriting functions which allow lenders to make quick and successful credit decisions.
  • Prepayment penalties: One of the hidden terms that many borrowers are not familiar with are the various repayment penalty options. These penalties often become very expensive if a borrower chooses to pay off his loan early. A commercial mortgage broker will help you negotiate the lowest prepayment penalties available.
  • Certainty of execution: Very often, a lender will issue preapproval terms to a borrower and then change terms prior to closing. A good commercial mortgage broker will work to ensure that the loan will close on the originally quoted terms.
  • Closing conditions: We often see loan requests that were preapproved by lenders and were not able to close because the borrower was unable to meet the conditions necessary for closing. A commercial mortgage broker will prevent these situations from occurring by understanding the transaction upfront and making sure that the conditions precedent to closing are obtainable. This alone saves headaches and many weeks of wasted time.
  • Loan amounts and LTV ratio: Because a commercial mortgage broker is an expert at properly packaging the loan request, they are often able to secure loan approvals with a higher offered loan amount and higher LTV than many borrowers are able to obtain on their own.
  • Negotiation experience: Many commercial mortgage borrowers negotiate commercial mortgage requests once every five years or so. They are often inexperienced at negotiating and dealing with lenders who negotiate loans every day. A commercial mortgage broker negotiates loan terms for a living, speaks the lender’s language, and is not intimidated by the process. Most borrowers are well served by allowing a professional to handle this transaction for them.

The President of Select Commercial, Stephen A. Sobin has over 30 years’ experience representing mortgage borrowers in their search for optimal financing solutions to their commercial borrowing requests. As the former President of mortgage lending division of a Federal Savings Bank, Stephen is well equipped to put his experience to work for you. If you would like to discuss a transaction with Stephen, please call him at 877 – 548 – 9454 or click here to complete a free loan quote form.

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