Discussion Points For Most of Our Clients

1.  Prepayment Penalty and Lock Out

A prepayment penalty is a common feature with commercial loans.  Since loans from our lender network are not designed to be short-time financing solutions, we charge a prepayment penalty to be imposed in the event of an early payoff.

A lock out does not prevent the payoff of a loan.  It is an agreement to pay all of the interest that would have been due to the time period covered by the lock out.  Since our commercial loans are considered to be long-term financing, the pre-payment penalty and lock out should not affect the payment schedule.

Please Note: The prepayment fee may be avoided after the lockout is expired and property is conveyed by assumption of the mortgage.  Prepayment penalties vary by the term of the loan.  Please consult with Bob Harris -“The Money Guy”.

2.  Appraisal Fee

Our Lenders determine which appraisal firm is used.  The reports are very detailed, and require a lot of research and investigation.

The cost of the report reflects the level of information and analysis required by our investors.  A complete summary appraisal is often required so that the appraisal analyst can fully appreciate the market area and the market for comparable properties to justify the subjects appraised amount. 

A complete summary appraisal will include all the necessary research and investigation required to make a prudent lending decision for a stated income/asset program.

A complete summary appraisal may be in the $1,500 to $3,500 range.

Conducting the Appraisal:  Key Differences

Residential Versus Commercial Appraisals

Our lenders reserve the right to order a “Limited Appraisal Report” based on property type and location.  Limited Reports are usually lower in cost and result in faster turnaround times.

Our lenders will order a commercial appraisal once an upfront appraisal process fee is paid to their agent, Mercury Real Estate Services, LLC.  This fee ranges from $1,500 to $3,500.

Non-payment of taxes and insurance place an unacceptable risk on our lenders.  In some cases of unpaid taxes, the lenders first lien position is compromised.  Our lenders require that an escrow account be established to cover the taxes and insurance premiums due for the subject property.  Lenders reserve the right to waive escrow of insurance premiums based on the borrower’s qualifications.

4.  Interest Rate

The interest rates available from a stated income/asset program (no verification) reflect the increased risk assumed by our lenders.

5.  LTV (Loan to Value)

LTV’s are consistent with the “stated” program reflecting risk assessment.  Because commercial properties may be less liquid than residential properties, an equity cushion must be maintained to compensate for the risk involved.

A liberal 90% CLTV (Combined Loan to Value) program is offered to assist buyers with limited cash assets to buy commercial property.

In fact many full document lenders will not allow for any type of seller-held second and will limit the amount of cash-out in a refinance transaction.

 Our lenders perform an Environmental Due Diligence on every commercial property being considered as collateral.

That process has been simplified by requiring the property owner or borrower to complete an Environmental Questionnaire describing the history and present use of the subject property.

On more complicated property types such as Industrial/Automotive properties, the lenders may require that Phase I and/or Phase II reports be provided.

7.  Terms 15, 20, 25, and 30 Years

Our lenders provide several term options.  These loans are fully amortizing without a balloon payment due in a few years.

Most commercial lenders require a balloon provision on their notes.  Balloon provisions are very costly to the borrower because it forces the borrower to seek new financing in the future.