Commercial Mortgage Rates Toronto

Private individuals and small scale companies often ask us lenders how we are able to determine the commercial mortgage rates Toronto that we give to them when they are seeking for a refinancing support. Lenders use a number of criterions when assessing whether to approve a loan application or to decline it. These criterions could be varied as depending on what the lender would deem necessary.  Aside from those, one of the most important things that we, lenders,  need to take into account is the amount of risk that a particular loan application is normally entailed with. It is important for us to review a loan application and the possible risks involved since this will help us gauge whether the perceived risks are greater than the possible gains or not. The lower the perceived risks are the better. It is because this will call for a lower rate. When perceived risks are higher, this will drive the commercial mortgage rates higher instead.

 

Qualifications for Borrowers

As lenders, we need to determine if a borrower is creditworthy or not. If he comes to us with a guarantor, he will also be taken into account and will not be taken for granted.  We can determine a borrower’s overall creditworthiness by measuring out his net worth, credit history, and real estate experience. What exactly we are looking for are borrowers who have a good history in owning, utilizing, managing similar properties. It is also important to us that the borrower does have some good amount of cash reserves which will help cover for any inevitable or expected expenses or emergencies. And lastly, this often comes as a surprise to many borrowers and many of them are caught off guard here. The majority of loan borrowers are not really aware that paying their utility bills on time will also have a great impact on them when they are seeking for approval of their commercial mortgage application.

Location of Property and Market Status

Top caliber real estate properties that are situated in suburban and metropolitan areas usually come with more value in terms of costs, and they also present a lower risk to us, as lenders. On the other hand, inferior real estate properties that are located in what can be considered as rural areas present us, lenders,  instead of with lower risks and therefore calls only for lower mortgage rates.  When a good property is exactly in a good location, it will be a lot easier to have it offered again on the market for lease if your tenants opted to move out or on instances that a tenant’s remaining lease term is short. Like for instance, if you have a house for rent that is in a poor location and your current tenant decided to move out, you will need to have a significant amount of remodeling job done on it first before you can offer it up again in the market. Renovating your house for rent property will just help increase its market value again and thus will also increase your chances of attracting interested tenants anytime soon.

Stabilized Occupancy

We, lenders are also interested to see properties with good potential for high occupancy levels,  and if you happen to have one that has not had any disruption for the last 2 - 3 years, then it can easily get approved for financing assistance or mortgage. What we qualify as a high-risk property type are those that have fluctuating rental histories and those that always have vacancies for long periods of time.  We may actually necessitate loan applicants to furnish us a copy of their most recent operating statements, as much as possible within the last 2-3 years. What we are anxious to see from here is a steady occupancy trend and, if possible, and a net income that is on the increase. If a property is observed to have a fluctuating income and high in expenses, it may not be a good property for us to provide financing because it will certainly just produce doubts and questions about its integrity as a profitable real estate property.

Tenant Mix

It is desirable for us lenders to finance retail and office properties where the tenants can be described as good quality and their lease terms are for long term. What we, lenders, are trying to veer away from, as much as possible, are the real estate properties that have high turnover rates, vacancy, and even those properties that are in constant state of flux. What we like to see first so we can provide financial assistance are those property owners who know exactly how to maintain their properties well. This is very important in such a way that it can easily attract tenants that are most interested in long term lease on it.

Condition of the Property

We also consider providing financing assistance to properties that have a deferred maintenance yet is still in a very good condition as opposed to those that require major renovations or repair.  Properties that are in dire need of capital improvements will also need a significant amount of money, too, to help fund it.  If we find that the property in question is indeed in a poor condition and not properly maintained, as lenders, we need to set aside escrow funds to be used for its repairs and maintenance.  A property that is in poor condition will automatically not have a good performance, much worse than what can be expected of well-maintained properties.

Debt Coverage

When we say debt coverage, what we are exactly pertaining to is the excess amount of the net operating income overpayments received for the annual mortgage. There is a perceivable lower risk involved when a property is observed to produce more of an excess cash. The excess amounts of the cash flow can be allocated instead in mitigating cash drain, repairs, renovations or turnovers.

Leverage

When it comes to determining calculable risk, another important aspect to consider is loan-to-value.  Loan-to-value or a  50% LTV loan is bound to have a better price amount than a loan that comes with an 80% LTV. If the property is observed to be undergoing some kind of difficulty or challenges,  it is very likely to open more rooms for error when it comes to low average loans.

The bottom line here is that we, as lenders the least thing that we will want to happen is to have our lending institution be exposed to undue risks. If you are in the process of contemplating on reaching out to a lender for your commercial mortgage concerns, you may want to address all these perceived issues or concerns to the satisfaction of lenders at the application stage. This will help increase your chances of availing the loan amount that you are trying to aim for with the lowest interest rate possible.

The moment that you have fully satisfied all the criterions for a commercial mortgage loan, it will work to your advantage that you have somehow a good idea of what is going to be your supposedly monthly payment in advance. For this purpose, you may find that a mortgage calculator will be of great help and a very indispensable tool at that. It will help calculate the monthly payment that you are supposed to make for your mortgage. Should you have any need for assistance when it comes to commercial mortgage rates Toronto, you may want to reach out to a reputable mortgage broker any time soon.