What is a commercial mortgage broker?

Do I need a broker?

Is there a downside to a commercial mortgage?

Who needs a commercial mortgage loan?

What is a leasehold mortgage?

What are participation loans?

Why would financial institutions use a participation loan?

 

 

 

What is a commercial mortgage broker?
A commercial mortgage broker acts as an intermediary who brokers mortgage loans on behalf of businesses or individuals who need a commercial loan. The loan is provided by the commercial lender securing a commercial property of the borrower. In the United States, mortgage brokers are the largest sellers of mortgage products for lenders.

Some commercial mortgage brokers offer loans but most of them do not provide commercial mortgage loans. A commercial mortgage broker is often used to connect the borrower with potential lenders, obtain multiple quotes, and to manage the financing process.

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Do I need a broker?
As markets for commercial mortgages have become more competitive, the role of the commercial mortgage broker has become more popular and a necessity. Because of this competitiveness, some lenders do not even consider applications made directly by borrowers. Instead, they prefer applications made by brokers, as they know the process and market values and rates very well. A mortgage broker also helps customers make better choices about loans and lenders.

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Is there a downside to a commercial mortgage?
There are two main downsides to commercial mortgages. The first is that they're not ideal for the cash-strapped entrepreneur because substantial resources are needed upfront in order to obtain them. The second downside is that these mortgages come with much higher interest rates than residential loans.

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Who needs a commercial mortgage loan?
If you need a commercial property loan or a commercial private mortgage, contact our team at Stonewall Associates. We provide different types of commercial property mortgages for commercial property owners.

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What is a leasehold mortgage?
A leasehold mortgage is possible when a lien is placed on the tenant's interest with the lease, and it is used as collateral for the loan the individual obtained. This means that monies were sought for one reason or another, and a lien is placed on the property lease with a financial institution.

Generally, this occurs so that the leaseholder benefits through financing a construction or to renovate the property. This permits the borrower to have the funding necessary to improve the land or housing situations without depleting their on-hand assets. The buildings or units then accrue revenue through rental or purchase.

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What are participation loans?
Several banks, for example, might chip in to fund one extremely large loan, with one of the banks taking the role of the "lead bank". This lending institution then recruits other banks to participate and share the risks and profits. The lead bank typically originates the loan, takes responsibility for the loan servicing of the participation loan, organizes and manages the participation, and deals directly with the borrower.

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Why would financial institutions use a participation loan?

• Selling loan participations allows the lead bank to originate an exceptionally large loan that would otherwise be too large for it to handle by itself. By engaging other banks as participants, the lead bank can remain within its own legal lending limits and still come up with sufficient cash for funding.


• Banks that buy loan participations share in the profits of the lead bank. If a lending institution isn't doing much business on its own, or is in a slow market, it can team up with a profitable "lead bank" in a healthier market to generate more lending income.


• Buying participation loans is a way for banks to diversify their assets. By investing a variety of loans in different locales, they reduce their risk and exposure to potential losses if a calamity, such as a natural disaster or severe economic depression, were to strike their community.


• Selling loan participations allows a bank to reduce its credit risk to a customer or specific community that entails greater than average risk.


• Selling participation loans allows the lead bank to keep control of more of an important customer relationship or even an entire customer relationship of large customers of the bank, instead of sharing the relationship with other competing banks.

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