Commercial Mortgage Loans – Institutional Funding Vs Private Funding (Banks Vs Hard Money)
A commercial mortgage loan is a type of a loan that is secured by property. It differs from all the other secured loans since a commercial property is at the centre of its security. Financial lenders often evaluate the property before they can grant a commercial mortgage loan. In an event that the evaluation of the property turns out to be within the range of the borrower’s supposed value, the borrower is said to have been favoured by the evaluation. The converse is said to be true in case the value of the property falls below the borrower’s supposed value. Financial lenders may choose to lend a lower amount of money or anything close to the value they had determined. This is mainly to avoid losing funds in case of a bad debt.
Two kinds of lenders
Commercial mortgage loans may be provided by banks or other financial lenders within the sector. Depending on your personal preferences, you may choose a banker or a private lender. Each of the two choices is associated with its own pros and cons. As a borrower, it is entirely up to you to single out a lender that is associated with more pros than cons. In order to make sure you have chosen the right lender, you can do well to critically analyse each of the two kinds of lenders as indicated below.
The banks are the major financial lenders of the financial market. Almost all financial activities of the financial market are attributed to the banks. Lending of commercial mortgage loans is also one of the major activities of the banks. Generally, commercial mortgage loans offered by banks are associated with lower interest rates and a longer time frame for paying them off.
The private lenders
Unlike banks, private lenders offer hard money commercial mortgage loans. These are associated with higher interest rates and a shorter time frame for paying them off. Nonetheless, they are much easier to obtain and are easier to come across.