what is a normal upfront cost of a mortgage?

5 Replies

Hello BP.

The best I could get for commercial mortgage with my credit and personal profile is 5.5% 5Y ARM. I am refinancing 5 properties at LTV 60%, loan amount is $395,000. Lender is a small local bank.

The DD took forever I want to check a few things:

  • I was told there was $900 document fee initially, but I was never given an estimate of the total cost of loan
  • last week, 1 week before close, I asked to see the HUD, and there are 20k of cost (lawyer fees etc).

While no number except appraiser fee and lender lawyer fee is shocking to me, I feel the appraiser ($450 per property+150 rental addendum) and lender attorney fees ($5000+) are really expensive given I went with my closing company.

2 questions:

  • 5% of loan upfront origination cost seems very high to me, what is the normal range for commercial?
  • I thought bank needs to show estimate of costs before proceeding. Is it not the case?

any other comment welcome.

@Sebastien Hitier a couple of questions here:   Are these 1-4 unit properties?  Any reason why you are using a commercial loan for these?  Meaning, can we do a conventional loan?

These are 5 SFH. I say commercial because they are owned by LLC.

Its not the owner of the property that determines the type of loan, is the property type. 4 units or less is residential, 5 or more is commercial. That being said, it sounds like you are using a single loan for 5 separate SFHs, is that correct? Check out Corevest - they will do this type of loan, with residential terms (30 fixed).

5.5% sounds high for a 5 year ARM. I would expect that for a 30 fixed in the current market.

$20k of fees for a single $400k loan sounds extremely high.

@Sebastien Hitier portfolio/commercial lending can be so different from bank to bank since each bank will decide on how to use their money.  Since these are Single Family Homes I might suggest to just go conventional.  The rates will be a 3 year fixed rate, you won't have to pay ANY application fees, points are optional...they are just a much more stable product for forecasting your future cash flow and in keeping your costs lower.  They might have more paperwork to them....and it could be harder to qualify for them depending on your scenario...but I think getting some numbers for a loan of that type will allow you to compare.

@Ryan D. , indeed, how could I run a 20k+ mortgage close bill??

let's see, appraiser took 2100 for 5 properties and then charged 700 more for rental addendum and then 750 more when bank asked for second viewing after irma. That's 3500

Then close co, title insurance etc cost $7278, there is $2500 of closing fee and the rest if title insurance, lien search, surveys.

Then lender attorney asked for $4600 which is very rich, he found something that looked like a title cloud to him, and I had to hire an attorney to represent me, as there was a problem with a badly done florida land trust...

Being non resident non US person, I had only found people who would lend me at high rates such as 7.5%, so that 5.5% sounded less bad, but the cost of it all changes the economics of the deal, and it was disclosed at the last minute, the lender never gave me an estimate of that.

@Andrew Postell , I tried to go conventional, but being a non US, non resident person, I could not find an offer below 5.5% for a 30Y loan. 

This being said, I complained to the bank that being 5% upfront closing cost that was disclosed days before close was suddenly changing the economics of the deal and asked if we could raise LTV or lower rate, the VP there told me 6% was customary for such loans. I am not convinced and I ask biggerpocket as I think I should ask that lender attorney to get a haircut.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here