Tips for Finding the Right Commercial Mortgage

A business succeeds thanks to a well-designed plan. Searching for a commercial business loan is the same. Here are a few tips to help find the right commercial mortgage for your needs:

Fixed- or adjustable-rate?

The most important option affecting your loan is whether the interest rate is fixed or adjustable. If you choose an adjustable rate mortgage (ARM), you'll have many choices regarding how often the rates change, and how much you pay each month. Fixed rates are best if you expect interest rates to climb. If you think rates are falling, ARMs offer better flexibility.

Prepayment penalties

Many commercial loans include a prepayment clause that says that if you pay off the loan before the maturity date, you have to pay a significant penalty. Some borrowers prepay anyway, if it's advantageous. For example, if you can save $50,000 by switching loans, and the penalty costs you $10,000, you'll still save $40,000-it's probably a wise choice. Understand any potential prepayment penalties before signing on the dotted line.

Amortization schedules

The length of the amortization will determine your mortgage payments- a longer term means smaller monthly payments. It's also possible to borrow a short-term loan with low payments, followed by a large balloon payment due in a lump sum at the end. Mortgages of 15-20 years are common, but longer terms are somewhat rare. .

Commercial mortgage brokers

Commercial lenders compete by offering a huge variety of terms and options. Therefore, using a broker is often the most practical way to mortgage shop. Commercial mortgage brokers search among a variety of lenders to find the best deal. They tend to work hard for their clients to negotiate attractive rates and terms, particularly since they only earn a fee if you accept their deal.

Shop around to find the commercial mortgage that best suits your needs. You may not get everything you want, but by doing your homework you can increase your chances of finding a commercial loan that offers good value with reasonable terms and rates.