Commercial mortgage loan – factors you must be mindful of to qualify for one

An application for commercial mortgage loan may be delayed or rejected because business owners are not familiar with the qualifications for the loans or of how to apply for such loans

By: Hitesh Khan/

An application for commercial mortgage loan may be delayed or rejected because business owners are not familiar with the qualifications for the loans or of how to apply for such loans. Access to commercial mortgage loans is often hindered by the lack the relevant financial knowledge and / or the resources to engage professional mortgage broker services to manage and address their obligations and financial liabilities as business owners. The terrain to apply and qualify for loans is also uneven because creditors are not just banks but finance companies and other licensed lending entities whose security arrangements may be different or more complicated.

As a high number of applications for SME loans are unsuccessful, it is important for passionate business-owners to consider non-bank lenders to sustain their business operations. It is also important for them to work with trusted hands, and with people who know the industry.

When applying for commercial mortgage loan, be mindful that the stated interest rate is often artificially low when one considers all the costs of a loan.

Points are a simple way for lenders to express a charge that equals 1% of a mortgage loan amount. Points are commonly used to calculate interest rate discounts, origination fees, and lender credits. Other costs may include:

• Legal fees,
• Survey charges,
• loan application fees, and
• Appraisal charges.

Every item that will be charged against your commercial mortgage loan or that must be pre-paid.

For some commercial mortgage loans, these charges can be tens of thousands of dollars. Sometimes, they must be pre-paid before the loan will be approved or rejected. You will need to know whether you are likely to be approved before spending money just to qualify for a commercial mortgage loans.

Other questions to ask your lender if you are taking a commercial mortgage loan:

• Will my interest rate go up if U.S. interest rates go up in general?
• Is a fixed-rate alternative available?
• Can I get a discount for paying your mortgage faithfully and consistently over a period of time?

Some lenders allow for decreases in the interest rates over time if you pay the mortgage on time. But if you want to refinance and repay your mortgage early, the lender may penalise you and charge extra interest. All of these details are important, and they can seem overwhelming.

Keep in mind how you expect your business to perform in the future and how you plan to repay the loan. Do not ignore worst-case scenarios. You do not want to be so optimistic about the possibilities that you lose sight of the fact that the lender may take away your business or livelihood if you do not meet all the terms. Sometimes the lowest interest rates represent the riskiest loans.

When considering commercial mortgage loans, borrowers should seek out lenders who are willing to fund the loan under acceptable time constraints, keeping in mind their general creditworthiness. Borrowers should look at both bank and non-bank funding in order to get their needs met in a timely manner.

Asking questions and obtaining unbiased evaluations will reduce delay and frustration. Fortunately, new lenders have emerged to challenge banks on their traditional terms, so borrowers have more leverage now than ever before when seeking commercial loans.

Servicing your loan every month and seeing your bank balance taking a dip can be quite depressing. But what if you had a chance to lower your mortgage payment or even raise more funds on your property? When the window opens for an option to switch to another financial provider, it should be considered as it offers you an opportunity to get better terms from your previous loan. This is similar to refinancing for home loan.

This means that many owners of commercial properties are compelled to refinance every 2 years or else the interest cost will eat them alive. Commercial property includes retail, office, HDB shophouse, strata title shops, conservation shophouses, hotels, commercial buildings and mixed development.

If you hold a commercial property, you are likely running a business there or an investor – whether as an individual or under a corporation or investment holding company. Any decision would probably require you to do a cost-benefit analysis. The main reasons for refinancing or switching to a loan from another financial institution include raising cash, capitalizing on low interest rates to cut financing costs and a change in loan tenure.

How to Secure a Commercial Loan Quickly

Do you need commercial mortgage loans but are unsure if you can get them? Don’t worry because good mortgage brokers can set you up on a path that can get you a commercial loan in a quick and seamless manner.

Alternatively you can read more about the Best Commercial Loans in Singapore before deciding on your purchase.  Good brokers have close links with the best lenders in town and can help you compare Singapore commercial loans and settle for a package that best suits your commercial purchase needs.

Whether you are looking for a new commercial loan or refinancing for your commercial properties, good brokers can help you get everything right from calculating mortgage repayment, comparing interest rates, all through to securing the best commercial loans which fits your profile. And the good thing is that all their services are free of charge. So it is all worth it to secure the best commercial loans through them.