Interest
Rate
There
are several
different
components
to commercial
mortgage
pricing
that you
should be
aware of
before initiating
the process.
The most
obvious
fee (and
most important)
is the interest
rate. Lenders
will usually
charge the
prime rate
(interest
rate that
is offered
to large
businesses
and institutions)
in addition
to a small
percentage
of the total
loan. The
rate of
the loan
will fluctuate
depending
on the risk
of the business
and the
amount of
the down
payment
that you
make.
Down Payment
The down
payment
is another
large expense
that you
need to
be aware
of. Typically,
the down
payment
is between
20 and 30
percent
of the total
cost of
the property,
although
you can
negotiate
terms that
include
a lower
down payment
and higher
interest
rates. It
is advisable
to make
as large
a down payment
as possible
in the beginning
because
then more
money will
go towards
the principal
and less
towards
interest.
Appraisal
Fee
You will
need to
hire an
appraiser
in order
to value
the property.
Typically,
the fee
for such
a service
ranges from
$1,500 to
$5,000.
The size
of the property
being appraised
will determine
the fee.
Additional
Fees
There
are several
fees that
the lender
will charge
you as well.
You will
be charged
for all
of the credit
and background
checks as
well as
any other
research
that the
lenders
choose to
conduct.
While there
is no specific
price range
(it largely
depends
on how thorough
the lenders
want to
be) you
can expect
the whole
process
to set you
back several
thousand
dollars.
Lenders
may also
choose to
charge fees
for the
loan application
and for
processing.
You should
look out
for these
hidden fees
when choosing
a lender.
Hiring a
Lawyer
If you
decide to
hire a lawyer
to review
the terms
of your
agreement
and represent
you at the
signing,
you can
expect to
spend several
thousand
dollars
more.
Hiring a
Broker
Finally,
if you hire
a mortgage
broker,
you will
probably
end up paying
1%-2% of
the value
of the loan.
That percentage
may be higher
if there
are special
circumstances
or it is
a particularly
large loan.
Taking
out a commercial
mortgage
is not a
cheap endeavor
and thus
you should
examine
your financial
situation
and/or business
cash flow
before proceeding.
A commercial
mortgage
can, however,
provide
you with
the necessary
start-up
to begin
a very lucrative
commercial
endeavor.