Not all commercial mortgages are the same. So you will want to be certain to compare all of the important information in a loan agreement before selecting the one that best suits your needs.
Securing commercial mortgages can be very challenging. There is a huge amount of paperwork and documentation required and also often a lot of patience. So it can be very tempting to jump at the chance to sign the first offer that you get. But you will want to take the time to compare some critical information and terms before you decide which mortgage and lender to work with.
The most obvious factor that borrowers are interested in with commercial mortgages is the interest rate. This rate has a big impact on how much your monthly payment will be and how much it will cost you to borrow the money over the life of the loan. Borrowers are pretty smart about checking the interest rate when they are offered a loan. But they are not always as diligent when it comes to comparing the other fees associated with commercial mortgages. Some lenders will charge a flat percentage of the loan, such as 1% per $100,000 borrowed but other lenders will charge fees for different processing stages or services that are rendered to complete the loan. A broken out list of fees could include an appraisal fee, a loan application fee, a loan processing fee and also fees for surveying the property. Regardless of what the lender is calling the fee or how they have it structured, be sure that you know what the total cost of all of the services and fees will be. That is the only way to know exactly what the total cost of the loan will be.
Another factor that can cost you a lot of money is the length of the loan repayment or the term of the loan as it is frequently called. It might be hard to make a larger monthly payment and repay the loan in a shorter time frame but remember that the longer the term the more you will be giving the lender in interest. The shortest term that you can manage will be the most cost effective loan for you to select.
Beware of Penalties
One way to avoid paying some of the interest is to make extra payments or to overpay each month. This will reduce the length of time that you are paying and reduce the amount of interest that you are paying. But not all lenders are willing to allow you to pay a loan off early. Some contracts will include an early pay off penalty that could end up costing you more than you are saving by paying the loan off early. Be sure to read the loan agreement carefully to determine if there is an early pay off penalty and if so how much it is.
Be Patient and Make a Full Evaluation
Reviewing a legal document such as a loan offer can be very difficult. It is well worth the money that you will spend to have your legal representative review the documents with you. Your lawyer will be able to sift through the legal jargon and provide you with simple answers about the terms of each loan offer. At that point, you can then make a well informed decision about which lender and offer best meets your needs.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.