There’s no doubt that with rising property prices worldwide, real estate has become one of the most profitable markets you can invest in today. Getting into this market, though, isn’t so easy. For one, you need a significant amount of capital if you want to purchase a money-making property like a shopping center or a hotel. In most cases, the price tag is staggering for everyday people.
That doesn’t have to mean, though, that you can’t get into the market. Instead, the smart option is to hire a commercial mortgage broker to get commercial real estate loans.
Exploring Commercial Mortgage Brokers
An Introduction to Commercial Mortgage Brokers
The best way to define a commercial mortgage broker would be as an intermediary, a middleman between a financial institution. One that provides loans and a party that needs capital from a loan to invest in real estate. Essentially, the broker talks with both parties. Understanding the terms and conditions of the financial institution. And, the needs of the to-be investor and works to get the loan approved.
Much like a lawyer takes responsibility for a legal proceeding, a commercial mortgage broker takes charge of the loan situation and is usually responsible for all aspects of it. This includes:
- Talking to the Lending Institution: The mortgage broker handles all communication with the lending institution on behalf of the borrowing party’s clients.
- Managing the Expectations of the Loan Applicant: The fact is, sometimes applicants can’t get the amount they need without having excellent credit. In those cases, the mortgage broker will explain to their clients what their options are and the immediately best ones.
- Preparing the Paperwork for the Loan: The lending institution, whether a private lender or a bank, will never release the funds without a host of documents, credit data, and other kinds of paperwork. The mortgage officer is responsible for preparing all of the paperwork related to the loan.
Finally, a commercial mortgage broker also plays the role of a loan officer. They collect, gather, sort, and deliver all necessary information required for the loan to the lending institution. As part of their duty to the lending institution, they also make sure that their clients make the payments on time and without delay.
The Costs Associated With Commercial Mortgage Broking
Usually, a mortgage broker who sets up a loan between two parties, the lender and the borrower, gets paid by the borrower: the borrower pays them a percentage of the loan amount. In most cases, they receive anywhere from 0.75% to 1.25% of the total loan amount from the borrower.
The compensation and fees associated with commercial mortgage brokers can often get confusing, which is why it’s the best option to get them cleared up before you start.
Why Should You Hire A Commercial Mortgage Broker?
Times When Should You See A Commercial Mortgage Broker
Like you’d expect, there are lots of situations where a commercial mortgage broker can help make your real estate investment dreams a reality. Whether it’s giving you access to a wide variety of loans or a broader choice in the lender providing it, mortgage brokers can have lots of benefits that you wouldn’t think of. Below, you’ll see the most common scenarios where your best option is seeing a commercial mortgage broker:
- When you want to get access to commercial real estate loans that aren’t readily accessible to you.
- When you have unique loan circumstances, like having a family-owned business or shop.
- And, when none of the standard mortgage options you’re seeing will work for you.
Believe it or not, sometimes people choose to work with a commercial mortgage broker even when they don’t necessarily need them. The reason, a relatively simple one, too, is that having a broker automatically means having access to a broader range of lenders and loans, giving you more chances of finding the loan option that’s perfect for you.
The Advantages of Hiring an Experienced Commercial Mortgage Broker
We talked a little about what makes a commercial mortgage broker valuable. Now it’s time to go into that in detail. Consult the list of the inherent advantages of hiring a commercial mortgage broker found below. Especially, to get a better idea of what these professionals bring to the table:
- Knowledge: No doubt about it. Knowledge is the first and foremost thing that a mortgage broker brings to the people. It’s one of the most specific benefits to understand, too. By hiring one of these professionals, you get access to their knowledge about the mortgage funding process. A good mortgage broker will consult on the properties you’re buying. And, also give you invaluable advice about the process.
- Connections: It’s widely known that brokers always have contacts in the field, but the true extent of this benefit might be challenging to understand. A brokerage firm with lots of connections not only means that you’ll get access to a wide variety of lenders. In fact, it also means that you’ll get different compensation options, hundreds of other loan options, and enough deals to keep you busy for days.
- Expertise: This is at once both an essential benefit of brokers. So, the first thing you should look for in a good mortgage broker. Efficient, expert mortgage brokers will immediately give you an inventory of your options. And make more options available as time passes. They’ll form a plan to get you the best deal possible with minimal delay. They will tell you what’s possible, what’s realistic, and what’s just a straight-up pipe dream.
Conclusion
After all of that, the bottom line is whether you need a commercial mortgage broker or not. And the answer, would have to be a resounding yes, unless you’ve experienced the real estate field yourself. A commercial mortgage broker will provide you with many things, but at the end of the day, they’re the best defense you have against being scammed into a horrible deal by a lender because you didn’t know any better.
