Commercial Mortgage PricingOur commercial mortgage portal allows you to prepare one, simple, mini-app in just four minutes. You can then submit this universal mini-app to our 750 different commercial lenders. Best of all, this commercial mortgage portal is free! Please click here to start the commercial mortgage application process. We have all learned that buying in large lots saves money. For example, when you go to Sam's Club and you buy a whole pallet of corn flakes, your cost per bowl of corn flakes is really cheap. Commercial loans, in general, are larger than home loans. Therefore one might reasonably expect that commercial loans are cheaper than home loans. Unfortunately, in most instances, the opposite is true. Conventional, conforming home loans are usually cheaper than commercial mortgage loans. The reason why is because there is an organized secondary market for home mortgages. If a bank makes a conventional, conforming home loan, and then suddenly the bank needs cash, it can quickly sell the home mortgage to Fannie Mae or Freddie Mac. No such organized secondary market exists for commercial mortgage loans. Therefore if a bank makes a commercial mortgage loan, and then suddenly the bank needs cash, it cannot usually sell the loan off - unless the bank is willing to sell the loan off at a deep discount. Therefore commercial mortgage loans are relatively illiquid assets. Before a bank will make an illiquid investment, the bank - just like any other investor - will demand a higher return. In fact, you can normally guess the approximate interest rate that most banks will charge for small (less than $3MM) commercial mortgage loans by looking at the prime residential mortgage rate. The prime residential mortgage rate is the rate charged by Fannie Mae for a conforming, 30-year mortgage. Let's suppose today that the prime residential mortgage rate is around 4.75%. Banks normally charge an extra 150 basis points (1.50%) for commercial mortgage loans, when compared to the prime residential mortgage rate. Therefore, if you applied to a bank for a small commercial mortgage when the prime residential mortgage rate was 4.75%, you could expect to pay around 6.25%. Conduit loans and life company loans are different. Most conduit loans and life company loans are at least $5 million. These loans are typically written with a fixed rate for a ten-year term. These loans are often assigned to a trust and used to secure commercial mortgage-backed securities. These securities are then rated and sold in the bond market, where there is a strong demand for such bonds. Because these bonds are rated, investors compete aggressively for them, and the rates are driven down. Conduit loans and life company loans are therefore often written at rates only about 25 to 35 basis points over the prime residential mortgage rate - or around 5.0% to 5.125% if the prime residential mortgage rate was around 4.75%.
Our commercial mortgage portal allows you to prepare one mini-app in just four minutes. You can then submit this universal mini-app to our 750 different commercial lenders. Best of all, this commercial mortgage portal is free! Please click here to start the commercial mortgage application process. |
