13 Myths About Commercial Loans

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Busting the 13 most Common Myths About Commercial Loans

In this video, I dispel some of the most common myths about commercial loans, including misconceptions such as the unvarying interest rates, pre-approvals, and the maximum Loan-to-Value (LTV). I also touch on topics like prepayment penalties, the financing process, the leverage in a deal, and the assumptions about bankruptcy and business plans. Lastly, I highlight the significance of acquiring a professional commercial mortgage broker for gaining the best loan.

Here’s the list (watch for more info):

00:08 Myth: You can get pre-approval.
There is no such thing as a pre-approval in commercial mortgage loan.
You can get pre-qualified, but there's no such thing as a pre-approval in commercial.

00:28 Myth: Interest rate is the most important factor.
The rate's typically going to be fairly consistent between similar lenders across the board, but it's the terms that matter.

01:09 Myth: A good lender can quote an interest rate for you over the phone.
There are just too many moving parts in a commercial loan to quote a rate without first looking at the documentation.

01:35 Myth: You can get a 30 year fixed rate loan in commercial real estate.
Well, technically, yes, that's true. But 99% of the commercial loans out there are 10 years, or less.

01:48 Myth: You’re guaranteed to get the maximum LTV on your loan.
LTV is just a constraint, it is not a guideline. The size of a commercial loan is based on the net operating income and the debt service coverage ratio. Lenders use those factors to back into the loan amount.

02:16 Myth: You can pay off or refinance anytime without a penalty When you get a commercial loan, you can pay it off (or refinance) at any time without a penalty. Almost every commercial loan comes with a prepayment penalty.

02:43 Myth: It's harder to get a commercial loan than a residential loan.
Not true. If the property can support the loan, it's actually easier to get a commercial loan, and oftentimes far less documentation is required. T

03:15 Myth: More financing is always better.
We always want to be using other people's money, but in situations where the interest rate or the lender's loan constant is higher than the cap rate, the more you leverage, the less money you're going to make.

03:40 Myth: You can get a commercial loan with no money down.
Commercial loans typically involve larger loan amounts and more risk. If you're getting a commercial loan, you need to expect to put money down. There's a difference between other people's money and no money down, and no money down doesn't exist.

04:19 Myth: All commercial loans are the same.
There are exponentially more moving parts in a commercial loan than in a residential loan. And almost every one of them is negotiable.

04:29 Myth: If you've ever had a bankruptcy, you can't get a commercial loan.
if previous mortgage lenders didn't take a loss, as long as there's a reasonable explanation, just because one has had a bankruptcy doesn't mean that they're automatically disqualified.

04:55Myth: You need to have a business plan.
Not true. In most cases, as long as you meet the requirements, you don't need to have a comprehensive business plan to get a commercial loan.
And finally,

05:17 Myth: You can find the best commercial loan on your own.
The chances of you finding a loan with better rate and terms than a professional commercial mortgage broker can find for you are almost zero. Get yourself a good commercial mortgage broker, and let them do the heavy lifting for you.

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[alexandervalladares]

Excellent Video thank you so much … 2-24-2024