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Mortgage tips
Commercial Mortgages Buyer's Guide
Updated: October 2008
- Unlike with other large purchases, it’s not always necessary to meet a lender in person to close a commercial mortgage. If you do the necessary research on their license, background, and references, you can iron out the details by e-mail, phone, and fax. Not having face-to-face interaction with the lender makes it even more important to have a lawyer oversee the process.
- Are you concerned about a broker’s ability to deliver enough value? Use the “one-point” test. If a broker can’t save you at least one percentage point, (from both money and time savings), look for another broker or go to a direct lender.
- Don’t rush to take out a hard money loan. Even though it seems appealing to provide less documentation and avoid many mortgage restrictions, hard money loans can get very expensive – as much as 5% of the loan value up front with 15% to 20% interest – and may hamper your ability to get a commercial mortgage in the future.
- If you own property but want to relieve yourself of the responsibilities that come with it, you can enter a “sale and leaseback” agreement with another buyer. The new buyer can assume your current mortgage, and then lease it back to you.
- Commercial mortgage lenders don’t provide funding for startup businesses. If you’re looking to launch a company, you may want to look into Small Business Administration (SBA) loans. SBA loans provide entrepreneurs with fixed rates to start new businesses.
- Don't start looking for property before you've spoken to someone about financing. You may not be able to afford as much as you'd like. Also, commercial financing often takes more time to complete than a residential mortgage.
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