Below are a few of the typical questions we field on a daily basis regarding Commercial Mortgage Refinance’s.

How long does it take to close?

The time to close is universally under estimated by banks, lenders and brokers. Many firms advertise 30 days, which is simply not the norm. Despite borrower’s frustration and confusion on why it takes as long as it does to close, the reality is that it is odd for a commercial mortgage to close in less than 60 days.

Oddly, one of the biggest delays actually is caused by the borrower’s inability and or reluctance to provide requested information. The borrower can have a huge impact on shortening the process by responding quickly to the lenders requests, even if they seem irrelevant or ridiculous.

What are the fees?

On a commercial mortgage refinance the borrower can expect to pay a bank fee of 1%, lender processing fee of approximately $1000, an appraisal will cost $2,000 – $5,000, title ranges from $800 – $2000, environmental report will cost between $800 – $1,800. The larger and more complex the deal the higher the costs generally will be.

What are my loan options?

The classic bank loan for owner occupant is a 5 year fixed, 20 year amortization program. In the wider market, options range from interest only, to 1 year adjustable, to 30 year fixed. Some lenders have created “stated income loans” where the borrower provides a limited amount of documentation.

What are prepayment penalties?

Prepayment penalties are a way for lenders to preserve their return on funding loans, if the mortgage is prematurely paid off. From the borrowers perspective this is a negative feature that tacks on an additional fee, which is in the form of a percentage of the remaining balance. For example, 5% for 5 years, prepay is market. In means that if the borrower was to sells on refinance the loan within that 5 year period he would owe 5% of the existing loan balance.

What is the application process?

Normally, after a preliminary verbal review of quotes and loan programs the borrower will be expected to fill out an application and provide documentation. Three years of business and personal tax returns, year to date profit & loss and balance sheets are requested. After a review of the above, the lender will issue a Letter of Intent which lists the terms of the potential loan. Assuming the borrower wants to move to the next step, they will be expected to sign off on the LOI, although this is not a binding step. At this point the lender will engage an underwriter(s) to thoroughly review the funding request.

If approved, the bank will issue a full Commitment Letter which is a binding documentation for both the bank and borrower. At this point and if agreeable to the borrower they’ll be expected to execute the Commitment Letter, provide money for the appraisal, environmental report, and processing fee. The loan has at this point been officially engaged.

Keep in mind that it is in the borrowers benefit to have their loan thoroughly reviewed before they commit to a lender so as they do not waste additional time and money on 3rd party reports.

Watch the video related to mortgage refinance program

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Help answer the question about mortgage refinance program

Is there a temporary relief loan program for California homeowners who have a tough time paying the mortgage?
I heard about the new loan programs that allow home owners to refinance their mortgage to a lower interest, but those who qualify need a decent credit, certain income, and their homes need more equity than what they borrow. But what about those who are really suffering and have none of those above?

About Author

248 885-8797 Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He specializes in Commercial Real Estate Loans between $300,000 – $5,000,000. Offers unique loan programs such as Commercial Second Mortgages, Commercial 30 Year Fixed and 90% non SBA financing, and Commercial Equity Lines. 248 885-8797

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