Common Mistakes While Seeking A Commercial Mortgage Loan
Post recession, commercial mortgage interest rates in UK have come crashing down. Currently, the interest rates are very attractive for business owners. If you are like most business owners, then you would want to utilize the opportunity.
Getting a commercial mortgage is no simple task. It’s time consuming, involves tedious paper work, talks, negotiations, etc.
While there are many lenders in the market offering attractive rates, it’s important to take the right decision. It means, you should be able to spend time understanding the nuances, the terms, the sub-clauses, etc.
For first-time borrowers, the entire process sounds overwhelming. To save yourself from the daunting task of filing the forms, or getting a good deal, you can do what most borrowers do: employ brokers to deal with lenders.
Despite all the steps you take, you might end up overpaying for the commercial mortgage loan
So, what are the common pitfalls to avoid? How do you make smart choices and get loans with great interest rates, low fees and for a fixed monthly amount.
This guide will help first-time borrowers as well as others, and help them know what to avoid.
Blindly Following the Broker’s Advice
While experienced and professional brokers can take the load off your shoulders, it doesn’t mean that you need no preparation. Understanding the mortgage market, the current interest rate, and other aspects of the loan will make you more competent to discuss your priorities with the broker.
To see how the market behaves, check the sites providing mortgage information. There are many sites on the internet that can provide free advice and tips to pick the best deal.
If you know anyone you has received a commercial loan, then additional inputs is always welcome.
Waiting Endlessly for Interest to Plummet
This advice goes to people who are just waiting to hit a few extra points. If you are thinking that interest rates will reduce, it’s going to take an endless wait. Eventually, you’ll be forced to borrow when the interest rate goes up.
Only Criteria is Interest Rate
Making a decision just on the basis of interest rates is a common fallacy among borrowers. For people who take the decision just on the low lending rate can end up paying high fees. It’s important to understand other fees charged by the lender and the overall terms of the loan package.
If you are not sure of the other terms, maybe you can consult an expert to understand the offer.
Not Knowing Your Credit Score
Long before starting the mortgage application process, you should know your credit rating. If the financial health of your company is in red, then you should first do something about it. Lenders will look at the repayment capability of the business, and also the personal credit history of the owners. Therefore, understanding the credit rating should be the first step for knowing how much you can borrow. When you do the credit check many months in advance, you will be more confident and avoid last-minute surprises.
Simultaneously Applying for New Credit
Many borrowers make the mistake of applying for other types of credit alongside the mortgage application process. When the lender sees that you are applying for other loans, it can dent your credit score. Besides, it can be a reason to refuse you the loan.
Not Keeping Assets in Order
The lender will want to study the value of the asset you are keeping as collateral. Before you start scouting for loans, make the right assessment about the value of your asset.
Unclear about Terms
There are many terms used in the contact that can be confusing, such as floating rate, closing cost, etc. Without proper understanding of the correct meanings of the terms, you can end up taking the wrong decision.
For clear understanding, there are plenty of resources on the internet. Check blogs and sites for understanding the meaning of terminology used in financial businesses.
Hiring the Wrong Mortgage Broker
If you are seeking help from a broker, then ensure that the person is experienced to serve your interest. In addition, check for reference before you engage in one.
Not assessing the Company’s Cash Flow
Once you take the mortgage, there is a liability to pay the monthly loan amount. So, before you avail the loan, think about the repayment part. Is your business in a comfortable position to repay the loan? Is the profit projection sufficient to pay without squeezing the working capital and touching other cash reserves?
Neglecting Additional Costs
While applying for a loan, there are other hidden costs not apparent, such as loan servicing fees, advisory charges, etc. They will vary from lender to lender. Sometimes the low interest rate will mask the other payments.
Matt Davis a partner at Empire commercial Finance, a firm specialising in business mortgage London seeking to serve client of UK with ease. A company with expert professional Commercial Mortgage brokers Cheshire and most independent business funding solutions
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