8 Questions to Ask Your Commercial Real Estate Lender

When it comes to financing commercial real estate, it’s important to choose the right lender. Before you sign any papers, it’s a good idea to ask a few pertinent questions to make sure you’re getting the best terms and conditions. Here are some essential questions to ask your commercial real estate lender. 

1. What types of loans do you offer? 

It’s important to find out what types of loans your lender offers. Different types of loans are better suited to different types of projects. For example, if you’re looking to purchase a retail store, a traditional loan may be best. If you’re looking to buy an office building, an adjustable rate mortgage may be a better option. 

2. What are the interest rates? 

Interest rates can vary greatly from lender to lender. Make sure you ask about the current rates as well as any special rates or promotions. Additionally, ask if the rates are fixed or adjustable and if there are any caps or restrictions. 

3. What are the fees? 

Fees can add up quickly when financing a commercial property. Ask your lender about any upfront fees such as application fees, closing costs, and points. Also ask about any ongoing fees such as annual fees or prepayment penalties. 

4. What is the repayment term? 

The repayment term is the length of time you’ll have to pay back the loan. Most commercial loans have a repayment term of 5 to 30 years. Make sure you know your repayment term before signing any documents. 

5. What is the loan-to-value ratio? 

The loan-to-value ratio is the ratio of the loan amount to the value of the property. Most lenders will require a loan-to-value ratio of at least 65%. This means that the loan amount cannot exceed 65% of the value of the property. 

6. Is there a prepayment penalty? 

Some lenders may charge a prepayment penalty if you pay off the loan early. Make sure you ask about this before signing any documents. 

7. What is the loan servicing fee? 

The loan servicing fee is the fee the lender charges to manage the loan. Make sure you understand this fee before signing any loan documents. 

8. Do you offer any special programs? 

Many lenders offer special programs designed to help borrowers with their financing needs. Ask your lender if they offer any programs that may be beneficial to you such as loan forgiveness, deferred payments, or reduced interest rates. 

Asking these questions will help you make an informed decision when financing a commercial property. Make sure you get the answers to all of these questions before signing any documents and make sure you understand the terms of the loan. This will help you get the best terms and conditions and ensure a successful transaction.