The Role of Commercial Mortgage Lenders
Commercial mortgage lenders fund loans for commercial properties. They do not deal with residential properties for private homeowners. Some of the many eligible properties that they might fund are:
- Residential Subdivision Building Projects
- Apartment Complexes
- Hospitals and Healthcare Facilities
- Shopping Malls
- Office/Retail Complexes
- Golf Courses
- Vacant Land
Many lenders will finance 100% of your loan, but of course you will need to prove your ability to repay the loan. At the top of the list is an above average credit score. You and your project must be deemed a reasonable investment risk in order for it to be funded. You will also need to provide many other forms of documentation before you get approved.
An appraisal on your project will also be required. Plan on spending anywhere from $1000-$10,000 or more just to get started with the appraisal process. You may also need to have collateral, in the form of cash, negotiable securities, ownership of film projects, land, or real estate (commercial or residential), or an approved government grant.
The Most Common Types of Loan Programs
Commercial mortgage lenders may offer several different types of financing programs to choose from:
- Permanent Financing. This is long term equity financing or debt. This type of financing is generally used to develop or purchase long-term fixed assets like machinery or factories. The payoff tends to be over a long period of time, thus reducing the risk of the principal payoff not being made.
- Bridge/Interim Financing. This type of financing is used when fast execution and an immediate need for funding are a priority. Bridge loans are ideal in circumstances that require a more creative and flexible type of loan that is tailored to specific needs.
- Mezzanine Loans. This type of loan is becoming increasingly popular. Lenders have reported zero losses on these loans and loan rates are falling. Mezzanine loans are used to finance large commercial properties such as large hotels and shopping centers. The loan amounts are high, seldom under $3 million. Another important characteristic of a mezzanine loan is that it is like a second mortgage, so the borrower must have some sort of first mortgage in order to apply for a mezzanine loan.
- Construction Loans. These loans are usually quite large, in the millions of dollars, and allow the borrower to build on a piece of land. Construction loans typically require interest-only payments during construction and become due upon completion. Some lenders will allow a construction loan to convert to a permanent loan later when construction is complete.
If you are a developer or business owner and have a large project that needs financing, or you want to purchase commercial property, such as an apartment complex, a commercial mortgage lender can assist you with the lending process and find the right loan to meet your needs.