| Below are a few of the typical questions we field | | | | preserve their return on funding loans, if the |
| on a daily basis regarding Commercial Mortgage | | | | mortgage is prematurely paid off. From the |
| Refinances. | | | | borrowers perspective this is a negative feature |
| How long does it take to close? | | | | that tacks on an additional fee, which is in the |
| The time to close is universally under estimated | | | | form of a percentage of the remaining balance. |
| by banks, lenders and brokers. Many firms | | | | For example, 5% for 5 years, prepay is market. |
| advertise 30 days, which is simply not the norm. | | | | In means that if the borrower was to sells on |
| Despite borrower's frustration and confusion on | | | | refinance the loan within that 5 year period he |
| why it takes as long as it does to close, the | | | | would owe 5% of the existing loan balance. |
| reality is that it is odd for a commercial mortgage | | | | What is the application process? |
| to close in less than 60 days. | | | | Normally, after a preliminary verbal review of |
| Oddly, one of the biggest delays actually is caused | | | | quotes and loan programs the borrower will be |
| by the borrower's inability and or reluctance to | | | | expected to fill out an application and provide |
| provide requested information. The borrower can | | | | documentation. Three years of business and |
| have a huge impact on shortening the process by | | | | personal tax returns, year to date profit & |
| responding quickly to the lenders requests, even if | | | | loss and balance sheets are requested. After a |
| they seem irrelevant or ridiculous. | | | | review of the above, the lender will issue a Letter |
| What are the fees? | | | | of Intent which lists the terms of the potential |
| On a commercial mortgage refinance the | | | | loan. Assuming the borrower wants to move to |
| borrower can expect to pay a bank fee of 1%, | | | | the next step, they will be expected to sign off |
| lender processing fee of approximately $1000, an | | | | on the LOI, although this is not a binding step. At |
| appraisal will cost $2,000 - $5,000, title ranges | | | | this point the lender will engage an underwriter(s) |
| from $800 - $2000, environmental report will cost | | | | to thoroughly review the funding request. |
| between $800 - $1,800. The larger and more | | | | If approved, the bank will issue a full Commitment |
| complex the deal the higher the costs generally | | | | Letter which is a binding documentation for both |
| will be. | | | | the bank and borrower. At this point and if |
| What are my loan options? | | | | agreeable to the borrower they'll be expected to |
| The classic bank loan for owner occupant is a 5 | | | | execute the Commitment Letter, provide money |
| year fixed, 20 year amortization program. In the | | | | for the appraisal, environmental report, and |
| wider market, options range from interest only, | | | | processing fee. The loan has at this point been |
| to 1 year adjustable, to 30 year fixed. Some | | | | officially engaged. |
| lenders have created "stated income loans" where | | | | Keep in mind that it is in the borrowers benefit to |
| the borrower provides a limited amount of | | | | have their loan thoroughly reviewed before they |
| documentation. | | | | commit to a lender so as they do not waste |
| What are prepayment penalties? | | | | additional time and money on 3rd party reports. |
| Prepayment penalties are a way for lenders to | | | | |