Negotiating a Commercial Mortgage Loan

If you generate income by owning commercial property, you may have needed to obtain a commercial mortgage loan at some point. Qualifying for the loan is the first step in this process, with the next step being that you receive the best terms on that commercial real estate loan. In order to decide whether you not you qualify, lenders look at factors such as your credit history, net worth, and the value of the property itself. As far as terms go, things such as the interest rate and payment agreements are items that can be negotiated. Here are some ways to help ensure that you get the best terms on your loan. 

Do Your Research

Before reaching out to a lender for a loan, research banks and lending companies online to see which ones offer the best rates and other terms before negotiation. This will give you some idea as to who offers the most competitive rates and terms for your specific business. Some lenders may have more experience dealing with commercial real estate than others, so try to see if each lender has any specialties. Knowing what your options are can help you make the best decision. 

Be Aware of What the Lender Refers To

There is a lot of jargon used in the lending world, so it is important for you to brush up on the terminology that a lender might use in your meetings. For example, a personal guarantee is an agreement that your personal assets are on the line along with your business assets in the event that you default on your loan. If this is something that you want to avoid, be wary of signing anything that has to do with a personal guarantee. 

Ask About Prepayment Terms

Many people think that it is better to pay off a loan early, even in a few as one or two lump-sum payments. After all, this means less paperwork for the lender and less worrying by the bank that you will be able to pay your loan in full. However, sometimes there are penalties for prepayments because prepayments detract from the amount of interest that the lender can earn on the commercial real estate loan. If you might be interested in making early payments, inquire about the terms of this before signing the dotted line. 

You can almost always negotiate the rates and terms of a mortgage, and these are some ways to do so.