Do I truly need one?
When you buy a commercial property for investment or for your company premises it takes a whole lot of planning and work. Commercial lending policies are not as clear cut as they are in residential financing so it’s worthwhile browsing broker websites to find an experienced commercial mortgage broker to have on your side.
What are the advantages and what should you look for in a commercial agent?
What makes commercial loans different from home loans?
Unlike a home loan to buy a residential property, commercial loans are not governed by the National Consumer Credit Protection Act 2001 (NCCP Act). That is really a good thing for you as creditors can be more flexible with financing coverage. The trick is trying to figure out what the bank would like to see in an application and wanting to get a reasonable deal.
By visiting a lender directly, many borrowers lose out:
- If you’re in a challenging situation, then the lender will use it as an excuse to overcharge you.
- Should you not know what competitors can provide, they will charge as much as possible.
- If you are a loyal customer with several accounts, they think you are going to be far less likely to leave so that they’ll charge you more!
What do commercial mortgage brokers do?
They will firstly sit down with you and work out what you are trying to attain. The agent will want to understand what type of commercial property you are looking at purchasing, whether it’s an office building, a warehouse, a retail store front or a factory. If you are PAYG, you will usually need to provide your latest payslip and a group certificate. If you are self-employed, the broker will have to see your past 2-3 years business and private financials such as tax returns and business activity statements (BAS). Fortunately, there are non-doc solutions available.
After all of this information is provided, the agent can go about searching for a lender that will approve your loan. Where a good commercial mortgage broker actually stands out is in their own abilities to negotiate for a competitive loan term and interest rate. Next, the agent will provide you with an Indicative Funding Proposal (IFP) to confirm the likely terms and conditions of the loan.
If you are happy with the proposal, the agent will arrange for a valuation and submit your mortgage application for acceptance. During the process, they’ll work with your solicitor and accountant and even liaise with your buyer’s representative (if you are using one) to offer you a smooth application process that’s in your best financial interests.
They talk your language
They understand your goals in purchasing a commercial property, whether you are following a solid rental return or your plan is capital gains. They even deal with company owners seeking to get their own premises. They cannot advise on where and when to buy real estate but can help you to achieve your targets.
They don’t work for the bank
They can compare a variety of lending options from a variety of different banks and second-tier lenders. It is often found that Australia’s non-banks are more competitive than the big banks when it comes to pricing and accepting unusual commercial properties (security types).
They will negotiate your interest rate and LVR
You should expect to pay an interest rate premium for a commercial property loan but it’s important to see that the speed and the amount you can borrow (your Loan to Value Ratio) are not set in stone. In actuality, banks do not even advertise their prices to the general public. It comes down to a seasoned commercial mortgage broker with the credit skills and connections with the business development managers in the bank to get you a good deal.
They’re experts in credit
Did you know that certain types of commercial properties such as farms and bed and breakfast (B&Bs) can be financed at residential prices? That is much cheaper than commercial prices and you may even get more loan terms. Everything depends on the lender and how agents can package the deal.
They offer a smooth application process
They are with you from application to settlement and beyond. That means less stress for you so you can concentrate on continuing to look at other investment opportunities or, even better, pay attention to your business.
A commercial agent is with you for life
High-end investing requires a commercial mortgage broker that can commit to you for the long haul. They’ll play an integral part in your professional team together with your accountant, commercial buyers representative and your solicitor. In that manner, you can focus on living your own life and getting on with business while the agent focuses on ensuring your loan remains competitive.
What should you look for in a broker?
First thing you should look for is credibility. As a minimum, they should have a Certificate IV in Finance and Mortgage Broking. They should also be an active member of the Fund and Finance Association of Australia (MFAA) or the Finance Broker Association of Australia (FBAA). Second, you’ll want to understand what their experience is. Have a look at their LinkedIn profile and do a little research on the property you are taking a look at buying and be sure they understand what they are talking about.
If they have a Facebook page, check out what the testimonials and opinions say – this cannot be deleted or removed. Any other tertiary qualifications or specialist training they have in commercial broking may also give you more confidence in your decision. Visit different mortgage broker websites to see what’s available and compare what they are each offering.
Lastly, seek out a commercial mortgage broker who is “licensed” or can write loans with a large selection of the major banks, second-tier creditors and customer-owned banks such as credit unions and building societies. Increased choice in creditors means that you have a better chance of getting approval for a well-priced loan that fits your requirements.