A commercial property loan is a long-term mortgage that provides you with the money to purchase commercial real estate. The property may be an investment where you rent it out, the premises of your business, or you can use the money to help fund or support your business. Whatever the purpose, the process of applying for a commercial or business mortgage is not as straightforward as a residential mortgage. The interest rates and terms on commercial mortgage loans can also vary significantly between lenders. If you’re currently in the market for a commercial mortgage, having an experienced commercial mortgage broker on your team can help you get a great deal. They can also help guide you through the process, saving you precious time.
How will having a commercial mortgage broker benefit me?
A commercial mortgage broker is a financial specialist focused on securing commercial and business loans for their clients. When looking for a commercial mortgage, you may find that meeting the qualifying criteria is harder for a business than for a personal mortgage. It’s often difficult for a lender to assess your repayment capacity as a business. You’d probably have a consistent spending and earning pattern that works for repaying your home loan as an individual. But as a company, your finances may fluctuate more often, making commercial loans riskier for lenders than residential home loans.
This higher risk means you’ll be asked to provide more paperwork to convince a lender you’d be able to repay the loan. A good commercial mortgage loan broker can simplify this process. They’ll help by preparing and filing the application on your behalf and negotiate a potentially better rate than what is advertised by the lenders.
How to choose the right commercial mortgage broker?
With hundreds of commercial mortgage brokers in the market, it’s natural to feel overwhelmed. But finding an experienced broker to guide your property journey doesn’t have to be complicated. By doing a little research beforehand and following a few tips, you can find the right commercial broker for your purchase.
1. Look for all relevant licenses
The first and most important thing to check is whether a broker is licensed to work as a mortgage broker or not. The minimum criteria to work as a mortgage broker is a Certificate IV in Finance and Mortgage Broking.
Additionally, they should be an active member of the Finance Broker Association of Australia (FBAA), the Mortgage and Finance Association of Australia (MFAA), or the Mortgage Industry Association of Australia (MIAA). These requirements are the same for both residential and commercial mortgage brokers.
However, a commercial or business mortgage broker will have dedicated practice and experience in brokering commercial and business loans. They may hold additional qualifications or specialist training in commercial broking. This puts them in a better position to guide you with commercial real estate purchases.
You should also ask any broker for their Australian Credit License (ACL). As ACL-holders, brokers work under the National Consumer Credit Protection Act (NCCP). This puts them under an obligation to only recommend suitable products for you, based on a reasonable enquiry of your financial situation.
2. Check their experience and user reviews
Besides confirming the qualifications, you want your mortgage broker to be approachable and easy to work with. Referrals from people you know and testimonials on a broker’s website or social media can give you an idea of their working style.
At RateCity, we offer you a panel of verified mortgage brokers dealing in residential and commercial mortgages. Depending on your location and requirements, we can connect you with an experienced mortgage broker online. We also have a transparent feedback system in place so you can read what other users have to say about the mortgage brokers on our panel.
3. Additional checks
In addition to the above, you’d be smart to check that the mortgage broker is registered with the Australian Securities and Investments Commission (ASIC). Another thing to check is if they’re registered with an ASIC-approved external dispute resolution scheme, such as the Australian Financial Complaints Authority (AFCA).
Benefits of working with a commercial mortgage broker
If you’re thinking of financing a commercial property, engaging a commercial mortgage broker can save you a lot of hassle and some money, too.
When you apply for a commercial mortgage on your own, you might spend a significant amount of time identifying the right lender. This can seem pointless if that lender doesn’t approve your application. Or the approval process takes a long time, but you need to get financing in a hurry. A commercial mortgage broker can help in these situations by submitting your application to the lenders who are more likely to approve it. They can take into account if you need the financing fast and help expedite the process to get you the money as quickly as possible.
The interest rates and other fees associated with business or commercial property loans tend to be higher. If you can secure even a small discount, you can save a significant amount of money in the long run. A decent commercial or business mortgage broker can help you compare apples with apples to pick the cheapest and most suitable mortgage deal for you. Sometimes, commercial brokers are provided exclusive special offers by some lenders because they’ve worked with them for a long time and brought the lender a lot of business. The brokers will often pass along these savings to you, giving you access to cheaper interest rates and other discounts.
A commercial mortgage broker can also save you time and money by letting you leverage their relationships with other industry professionals. For instance, a seasoned commercial mortgage broker will have a network of reliable professionals, including accountants, lawyers and appraisers they can refer to you.
How is a commercial mortgage broker paid?
Most commercial mortgage brokers are paid an upfront commission and a trail commission for the business they bring to a lender. The amount is generally based on the loan size and other factors. This means you get to access the services of an expert mortgage broker for free.
A trail commission is paid to good mortgage brokers because they shouldn’t only offer you a one-off service. They should continue to work with you to make sure the loan is still the right one for you. This may mean refinancing the loan at a later date or just restructuring it. Lenders typically pay them for the quality of business they bring and to manage the relationships with borrowers to minimise loan defaults. It’s a win-win situation for you because a broker who’s doing their job well will ensure you’ve got a loan that won’t cause you financial stress.
Overall, working with a commercial broker that has a relationship with a wide range of lenders improves your chances of approval and securing a competitive deal on your commercial property mortgage. Mortgage brokers are also required to work in your best interest, which means they need to find a deal that doesn’t put you in an adverse financial situation. If you’re looking for a business or commercial loan, you can consider speaking with a specialist broker to learn more about your options.