You’ve found a developed property that could be profitable once again with a little work. Alternatively, you want to develop a commercial property from scratch. Either project will require some type of financing. How will you know if a mortgage offer is actually a good one? As you mull over the offers that come your way via the efforts of the Clover Mortgage agents, keep these four qualities in mind. If an offer contains all four, the search for financing may be over.
Take a Good Look at Your Balance Sheet
How much will you need to borrow? Keep in mind that it’s more than the purchase price. There are other fees and expenses associated with the purchase itself. You also want to think about what it will take to get the property up and running.
Even if the plan is to buy a developed property, it will still take money to update and renovate it. Those efforts must be completed before you can secure tenants to occupy the space. Make sure the resources you have on hand plus the amount borrowed will keep you financially afloat until that day.
Understand the Fee Schedule That the Lender Has in Place
Most lenders have fees that are either paid up front or bundled into the amount that’s financed. In order to ensure there are no surprises down the road, make sure you’re familiar with every fee or charge that the lender will assess. This helps you to know how much of each payment goes toward retiring the amount that your borrowed.
If feasible, try to pay as many of the fees as possible up front. Doing so means less of a balance that’s subject to interest charges. That may also make it easier to pay off the debt in less time.
Compare Shorter Financing Periods With Longer Ones
It’s a good idea to consider more than one term for your financing. While you may think that a longer term automatically results in lower installment payments, the difference between what you pay for 15-year financing versus 10-year financing may not be all that great. In fact, you may find that the payments on a 10-year obligation are only slightly higher than the longer duration.
What is different is the amount of interest you pay. When possible, opting for a shorter term could save a significant amount of money in terms of interest. If you can afford to do this without creating any hardship, opt for the shorter term.
Make Sure There are No Penalties for Early Settlement
You may think that lenders would love for borrowers to repay balances due sooner rather than later. That’s not always the case. In fact, you may have to pay a penalty if you settle the mortgage before the projected date. Depending on the amount of that penalty, it could be to your advantage to avoid repaying the debt early. If at all possible, go with a lender who does not penalize you for paying off the mortgage early.
To find the best deals, work with a broker. The professional will go over all the aspects of how these types of lending situations work. With all details about the commercial mortgage explained and all questions answered, you have an excellent chance of settling on the best financing option for your project.
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