Commercial loan origination fees

27 Replies

I'm refinancing a commercial property in the US for the first time. $1.7m loan, 65% LTV. One LOI I've received has quoted a 2% origination fee, which seems high to me. (Broker has a 1% fee on top). Presumably negotiable but can anybody give me an idea of what's reasonable to expect in the current market. Thanks in advance!

@Chris Cusiter

I want to say that 3% is in par with the norm. He will depend on the broker and the lender for sure you can still shop around and see if you find a cheaper origination fee lender or broker

@Chris Cusiter Prepayment would depend on the terms such as if it a 30 yr fixed or some ARM product. Could be 3, 5, or 7 years just depends really. I sent you a PM if you would like to discuss,

EVERY term is negotiable, so work the deal where you end up winning. Banks are beginning to shy away from some commercial real estate, but they're going to give you the best deal. You should not pay more than 1% origination and you can likely get away with .5% origination.

I just got done refinancing a $1.5M loan in TX for 4.70% fixed for 10 years and paid between .5% and 1%.

Just got directly to a depository bank. Not Chase or Wells, but a regional player.

@Chris Cusiter - it really depends on the loan and the borrower.  If the financials on the property are great, you have high W2 income, net worth and solid tax returns then you should certainly walk into a local bank and you'll get very low fees.  If the property needs work or has anything non-standard about it, you don't have W2 income, your net worth is low, your tax returns are shaky at best....you can still get a loan but you'll pay more in fees.  If you're somewhere in between your fees will be somewhere in between.  The lenders I use to grow my portfolio exist for a reason.  Not everyone can walk into a local bank and get a loan for a $1.7M property.

Originally posted by @Michael Jones :

EVERY term is negotiable, so work the deal where you end up winning. Banks are beginning to shy away from some commercial real estate, but they're going to give you the best deal. You should not pay more than 1% origination and you can likely get away with .5% origination.

I just got done refinancing a $1.5M loan in TX for 4.70% fixed for 10 years and paid between .5% and 1%.

Just got directly to a depository bank. Not Chase or Wells, but a regional player.

Just remember, you get what you pay for. If you have a lender that you "can likely get away with .5% origination" rather than paying that lending professional what he or she is worth, you get will almost certainly get the service you deserve.

@Chris Cusiter 

You may be able to get the fee down some, but each institution has their place.  Banks will be around a point and portfolio lenders will be more, usually around 2-3 points.  Some of those points your referenced may be going to discount or buy the rate down too; I'm not sure.

Stephanie

If your project can be underwritten on a full-doc basis the fee should be around .5 to 1%. At your LTV on an owner-occupied project, this should be a fairly straight forward deal. Stay away from any hard money or "portfolio" lenders quoting you anything above 1.5%, that's just crazy talk.

I am working on a $4MM cash-out refi on an owner-occupied warehouse in Colorado Springs and the fee will be 1%.

I would expect a prepay for 5 years, maybe less.

@Greg Dickerson  I am doing my first Multi Family Commercial deal and everything is a learning experience but I want to make sure I am not getting taken advantage of. 

When getting down to closing, our loan broker is charging a 1% origination fee and the bank doing the lending is only charging .25% so total its 1.25% which is a large amount for a $986,800 loan or $12,335 with a $750 processing fee. I thought the .25% seemed too good to be true and now the 1% broker fee is added in of course and it is catching me off guard. I think its slightly high and also unexpected. What are your thoughts? This seems on the pretty high side of a normal range for this loan. Not buying down the rate at all. Just straight fee.  

Originally posted by @Chris Cusiter :

@Greg Dickerson Thanks Greg. Is there a standard term also for pre-payment penalties? 2 years, 5 years etc?

If you are going with a commercial lender on commercial there should not be any prepayment penalties. 

Originally posted by @Chris Cusiter :

@Greg Dickerson Thanks Greg. Is there a standard term also for pre-payment penalties? 2 years, 5 years etc?

 You should not have a pre-payment penalty on a commercial loan like this. I would not agree to one. Remember terms are all negotiable and debt is a commodity if you are a qualified borrower. Shop it around.

Originally posted by @Reinhard Kurzen :

@Greg Dickerson  I am doing my first Multi Family Commercial deal and everything is a learning experience but I want to make sure I am not getting taken advantage of. 

When getting down to closing, our loan broker is charging a 1% origination fee and the bank doing the lending is only charging .25% so total its 1.25% which is a large amount for a $986,800 loan or $12,335 with a $750 processing fee. I thought the .25% seemed too good to be true and now the 1% broker fee is added in of course and it is catching me off guard. I think its slightly high and also unexpected. What are your thoughts? This seems on the pretty high side of a normal range for this loan. Not buying down the rate at all. Just straight fee.  

Those fees sound reasonable to me. Im sure the broker disclosed their fee upfront as its a requirement by law. Make sure you shop the deal and compare all the terms not just the upfront fees. The broker gets paid to put you in the best product so make sure they show you the options.

@Greg Dickerson thanks for the sanity check. Broker says he mentioned the fee but nothing in writing. I have also been doing some research and it seems like a reasonable fee for the loan and the building. Old brick building so we were limited on the lenders.

@Greg Dickerson

That might be a regional thing. I don’t know if I’ve seen a term sheet without pre payment penalty. At least two years and lots of times 5 years. Loan sizes 100k-2MM helps protect them from the refi. My experience anyway on both buyer and property manager sides. In Indianapolis at least. Obviously I haven’t checked all banks and could depend on strength of the borrower, but I’ve always seen it.

Originally posted by @Chris Cusiter :

I'm refinancing a commercial property in the US for the first time. $1.7m loan, 65% LTV. One LOI I've received has quoted a 2% origination fee, which seems high to me. (Broker has a 1% fee on top). Presumably negotiable but can anybody give me an idea of what's reasonable to expect in the current market. Thanks in advance!

 That’s SUPER high. Most I’ve paid is 1% to a broker. That was my first broker done loan when I didn’t know better. Upcoming deal I’m doing will be 1/2%.

When dealing directly with a local bank it’s normally 1/2% orig fee. Or 0 for agency debt 

Thanks for all the replies. Finally closed at the end of December on a 20/20 at 3.95%. 0.33% loan fee. Really happy with the outcome but it took a lot of paperwork, patience and a favorable appraisal to get there. Avoided the broker fee due to a direct relationship with the bank involved.