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Archive for the ‘Commercial Mortgages’ Category

As the banks around the world currently have the pick of the best real estate deals they wish to fund I thought I’d devote this article to helping you put yourself in the best position to secure the funding you may require for your development or project.

We are increasingly approached by developers desperate for funding. However what is surprising is how many of them have done very little preparation in preparing their request. Even when the banks were lending freely you still needed to have a comprehensive business plan put together and that requirement is even more acute in the current climate.

So where do you start when approaching a funder for money?

The first thing the funder will want to look at is a business plan. If you don’t have one then there’s no point asking if your project can be financed. Also you may wish to consider having it translated into the language of the country the project is based. This will make it easier for any local banks to consider.

The business plan should provide a detailed description of the business, what the business does or is proposing to do, years in business, view of current financial condition of company and who or what caused the company to be in its current position.

The request for funding should show the name of the company applying for funding and who the company owners are and their percentage of ownership.

How much funding do you need? Don’t be scared to ask for what you need as asking for too little can be counterproductive. What will the funds be utilized for? The lender is going to be looking at something they can secure a legal charge over ie land or property. They will also want to know how long you have been seeking funding and who you have approached and why they turned you down. Just because a previous lender turned you down doesn’t mean that it will jeopardize any new request.

What type of funding are you looking for and why? Do you prefer to offer equity in the project or would you prefer the debt to be secured against the asset. How long will you need the funds for? Lenders will be looking to see that you have a well planned exit route so that they can get their money back. This might be in the way of presales or deposits already received.

Lenders also ask how much you are investing into the project. This is known as hurt money. If you have a great idea but expect someone else to take all the risk without putting any money in then its unlikely your project will be funded. The lenders typically want to know how much of your own money is at risk with the project and how it has been spent so far. They will want you to briefly outline your plans to repay the loan should the business fail.

They will also want to know what experience you have in what you are trying to achieve and the experience of your management team so a CV is usually a must.

Once you have collated all that information along with your detailed financial documents then its time to submit it to a broker who will then be able to look over everything before submitting it to their lenders or private funder contacts.

A word of warning at this stage. We have heard of a number of developers desperate for money for their project parting with large sums of money on broker and application fees. Then unfortunately the promised funds never materialize.

How Overseas Mortgage Broker operate is that we get the developer to complete a funding application in the first instance. Once we have looked over this if all the required supporting documents are available then we would submit it to the lender or funder for their initial comments and to see whether they are interested in helping fund the project. If you haven’t bothered to put together a plan or can’t be bothered to answer the questions then that acts as a filter and ensures that only well thought out projects get put in front of our contacts

If the funder is happy to offer terms then only at that point would due diligence fees start to be incurred for things like valuations and maybe site visits. There may also at this point be a small broker fee as a sign of good faith. It’s highly unlikely you will get a funder providing you with a loan without any upfront costs however a good broker should be able to help you make your project presentable to a lender without hitting you for large fees for doing so.

I hope that gives you an insight into how to present your project and we look forward to hearing from you if you have any requirements.

Money can be generated from money. Based on this principle, commercial mortgage lenders advance cash and retain a building or real estate as collateral. There is little difference between a normal mortgage and a commercial mortgage. In a residential mortgage the residential building is the collateral. In a commercial mortgage the collateral is a commercial building or real estate zoned for commercial use. The borrower is a business which may be a corporation, a partnership or a limited liability company. The creditworthiness of the business is always determined before a loan is approved.

Usually, in any mortgage the money due to the borrower can only be secured by the collateral. If there is further deficiency in payment it is not possible to claim additional amounts through other channels. In the event of default, the lender will likely opt to take possession of the collateral to reclaim his funds.

Commercial mortgage loans are employed for various reasons. They are used to acquire land or commercial property, to developing present businesses, and to refinance debts that have been accrued in the normal course of business. Commercial properties are acquired for offices, warehouses, retail businesses and a variety of other uses. Commercial mortgages have many different terms for repayment. If the payments are not made the property pledged as collateral is at risk.

There are many banks and mortgage lenders that are eager to extend commercial mortgages provided the deal makes sense. They work within a framework of stringent conditions. One of the criteria that will be evaluated is the debt servicing capacity of the borrower. They also look into the viability of the business and its future prospects of income generation. The mortgage is a money making venture and the lenders will ask for a initial cash investment to somewhat mitigate the risk of the transaction.

The amount you can receive for a commercial mortgage is based on the value of the property that is being mortgaged. The personal credit worthiness of the individual borrower is typically not considered in this type of loan. In the case of bankruptcy, there are numerous legal hurdles to make it difficult for the lender to seize a residential property. In commercial mortgages the law makes it far easier to recover the debt by selling the commercial property.

Compared to residential mortgage loans the interest rates for commercial mortgages are consistently higher. A fixed rate of interest is usual in a commercial mortgage and the period of the loan is usually between three to ten years. Sometimes banks will consider a second mortgage in addition to a first mortgage. However, the interest rates will be higher than those of first loans.

The lender as well as the borrower is out to make money from a commercial loan. The lender is looking for avenues to invest his money through viable projects and the borrower is looking for viable loans that will further his or her business. The relationship between lender and borrower is truly symbiotic. Both gain from success, and both share in the risk in case of failure. Thriving businesses around the world owe their success in some part to the successful use of commercial mortgages.

Commercial Mortgages are also used to buy existing businesses consisting of property or land for development. Commercial Mortgages can used for the following: Farms Pubs, restaurants, night clubs, take-away units Shops, shops with living accommodation Hotels, guest houses, B&B’s, holiday lets Industrial units, factories, offices, warehouses. Taking out a Commercial Mortgage on a property might be the best way for you to get your hands on your next business venture. The project could be purchasing a brand new building or buying land. It’s fairly complex entering the world of the business finance but with a broker working on your behalf the entire process is sure to be easier. Problems like no proof of income, county court judgments or a poor credit history will become problems of the past because there are Self Cert Commercial Mortgage packages covering up to 85% of the property’s value.

It can be very difficult to obtain the most suitable mortgage for your business circumstances without an excellent knowledge of the market and good relationships with the lenders. A mortgage can be taken out to help businesses to expand, grow and improve as well as to buy new premises, buy to let or even a Re-Mortgage to raise investment capital.

The world of commercial mortgages may be appear quite daunting to the uninitiated or for those with no experience but help is at hand, the net contains a wealth of information which should go some way in alleviating any concerns you may have. The commercial mortgage marketplace has undergone a transformation over the last few years and there is now a vast range of commercial mortgage brokers and lenders to choose from.

Traditionally, most businesses approach their bank for commercial mortgages and loans but rarely do they receive service that meets all three of these needs. Just as with a residential mortgage an adverse commercial mortgage is designed for people who have had credit problems but who want to borrow money to expand their businesses. Some commercial mortgages are non recourse, that is, that in the event of default in repayment, the creditor can only seize the collateral, but has no further claim against the borrower for any remaining deficiency. Interest rates for commercial mortgages are usually higher than those for residential mortgages.

Maine Commercial Mortgages

There are several commercial mortgage programs to decide from in the state of Maine. Because there are numerous reasons for taking out a commercial mortgage, there are also appropriate programs in Maine designed to cater to each financial need. Here are some examples of how your Maine commercial loan can be set up.

Conventional Mortgages:

This is often a traditional commercial mortgage program that has options of 15, 25 or 30-year payback terms. It has choices of adjustable, fixed, or balloon payments. This type of mortgage financing is open to most borrowers with good credit history. Most loan to value ratios would be from seventy-five to eighty percent on commercial properties.

Non-Recourse mortgage or financing:

This kind of mortgage is the best for corporate investing because it allows the consumer to enjoy the financial rewards without having the personal liability.
Hard money loans or Bad Credit Loans:

If your credit is not perfect you still could be approved for a Maine commercial loan. Regardless of your past credit history, you can use hard money loans and secured against your commercial property and assets. You may also qualify for a loan-to-value ratio as high as eighty percent, but your rate will be higher then someone with good credit. Hard money lenders or banks may sometimes require private mortgage insurance to secure the commercial loan.

SBA loans:

This is targeted more towards small businesses that are not able to acquire the right financing. You can often get up to 90 percent financing to help you boost your commercial business.

Requirements:

Because, most financing bank and other lending companies review your credit history, here are some things that you may need to better prepare you in securing a Maine commercial loan: Amount and purpose of loan, credit authorization form, resumes for principal, current financial statements, tax returns for a period of two years, good quality color photos, current profit and loss statement, copy of leases, cost breakdown, partnership agreements and articles of incorporation.

Century Mortgages provides detailed information on Maine Mortgages, Maine Home Mortgages, Maine Interest Only Mortgages, Maine Mortgage Brokers and more.

A commercial mortgage generally resembles the residential type of mortgage, allowing one to declare a certain property as collateral in exchange for a loan that can be used to either buy or refinance that particular property. Once obtained, commercial mortgages can also be used to receive credit for various business purposes. When a person obtains a commercial mortgage and uses it to buy property or to establish a credit line for business purposes, the lender receives a previously negotiated interest in that particular property until the loan has been fully restituted. While other types of loans for personal or business purpose have a short-term repayment clause, commercial mortgages can be repaid over periods for up to 30 years. However, in case the person who obtains the loan doesn’t respect the terms stipulated in the contract (defaults on the loan or is confronted with arrears), then the lender is empowered to claim full rights of the property that was declared collateral in the contract.

When you request a commercial mortgage for business purpose rather than for buying property, the lender may decide to re-finance the existing mortgage or establish an equity line, lending you the equivalent for the difference between the present financial value of the property and the sum that you owe on the mortgage. Before applying for a commercial mortgage, it is important to know that there are actually two main types of schemes behind such mortgages: the fixed rate and the variable rate schemes. The fixed rate type of commercial mortgage involves a stable interest rate for either the entire period of the loan. In the case of the variable rate type of commercial mortgage, the interest rate becomes variable after a certain amount of time. When negotiating the terms of a certain commercial mortgage, you should ask for advice from your accountant in order to find out how much and how frequently the interest rate will tend to change until the loan is repaid in full.

Both these major types of commercial mortgages offer a set of advantages to applicants if they are appropriately speculated. For instance, the fixed rate commercial mortgage is a wise choice on the premises of continuously rising interest rates on the market. On the other hand, variable rates are the best option when all the economic indicators point to a depreciation of the interest rates in general. You should carefully investigate all these factors and analyze many other details before choosing a certain type of commercial mortgage over another. Even more important, you should spend some time finding the most reliable and convenient lender on the market in order to ensure that you will only receive the best loan offers possible.

In order to benefit from the best commercial mortgage offers and an efficient package of adjacent services, you should employ the services of a prominent commercial mortgage broker. It is advisable to employ the services of a London commercial mortgage broker, as they are renowned for the quality of their services. A competitive London commercial mortgage broker will help you find the best lenders and identify the interest rates that are most appropriate for you. You will be provided with valuable advice regarding commercial mortgages, commercial mortgage refinancing, commercial investment properties and other similar types of mortgages and loans.

The ongoing credit crisis has made it much more difficult for investors to qualify for an institutionally funded (bank, broker, insurance company) commercial mortgage loan. Underwriting standards have become significantly tougher and loan parameters have tightened. Very few deals are being accepted by the banks, and even fewer are actually closing.