Hi BP! I have a Maryland commercial mortgage broker who will shop lenders for my financing needs. My rental property presently has one SBA, and one conventional (balloon). The idea is to re-finance for a better rate by paying off the two and cash-out remaining equity available (no appraisal done recently).
The broker is proposing an agreement of an approximate $700 non-refundable fee to me, and 1% commission of the loan amount (loan amount approx $700K). This is not inclusive of any points from lender charged to me, appraisal, etc. Proposed length of agreement is 24 months, any intro's he makes to lenders are his. He also suggests shopping one lender at a time.
Would love to hear your thoughts on below. Thanks for reading, much appreciated!
My thoughts/questions:
1. Non-refundable fee does not make sense
2. 24 months is long
3. What is advantage of shopping one lender at a time?
4. What approx average commissions are expected for 700k loan amounts?
@Mit P. 1. Non-refundable fee does not make sense - agreed. Unless the broker is doing some sort of 'advisory / consulting' in the form of building proformas, deal analysis, etc. then I would only pay the 1 point after closing.
2. 24 months is long - This is negotiable. I've done terms that conclude at the closing of the transaction, and I've done 36 month terms. He is looking to be protected in the event you use his lending source for future deals. You could work out a step-down agreement in addition to the term length; i.e. 1st deal with this lender, fee is 1%, 2nd deal is 0.75%, 3rd deal 0.50% fee
3. What is advantage of shopping one lender at a time? - This is your (the borrower's) decision. The broker should already know who the best, or at least top 3, lending sources will be for your deal. Some borrowers prefer not to be "shopped" around, whereas some borrowers like to get a dozen quotes.
4. What approx average commissions are expected for 700k loan amounts? - 1% is market-rate standard for debt placement in my opinion
5. What approx interest rates should I expect? - This will be tough to determine without knowing more about your property. It will be Spread-based over an index; i.e. Treasury, Libor, WSJ Prime etc.
Thanks much for the reply this is very helpful at this time.
Just so I fully understand you, the step-down agreement applies to any deals (this deal, and future alternate property deals) within the agreement period, correct?
Hi BP! I have a Maryland commercial mortgage broker who will shop lenders for my financing needs. My rental property presently has one SBA, and one conventional (balloon). The idea is to re-finance for a better rate by paying off the two and cash-out remaining equity available (no appraisal done recently).
The broker is proposing an agreement of an approximate $700 non-refundable fee to me, and 1% commission of the loan amount (loan amount approx $700K). This is not inclusive of any points from lender charged to me, appraisal, etc. Proposed length of agreement is 24 months, any intro's he makes to lenders are his. He also suggests shopping one lender at a time.
Would love to hear your thoughts on below. Thanks for reading, much appreciated!
My thoughts/questions:
1. Non-refundable fee does not make sense
2. 24 months is long
3. What is advantage of shopping one lender at a time?
4. What approx average commissions are expected for 700k loan amounts?
5. What approx interest rates should I expect?
Hey Mit,
I agree, the Non-refundable fee does not make sense. I don't know any portfolio lenders in this space that charges a fee and then finds the loan.
24 months is way too long. We get an agreement with our borrowers for 120 days.
There is no advantage of shopping one lender at a time. As a matter of fact, your broker should know the lender's guidelines and know where he's sending you after your first conversation.
1 to 2 points would be average commission on that loan.
You can expect rates to range from mid 6's to mid 8's with a no income verification loan. On a purchase, with decent credit, you should be able to comfortably get 75% loan to value.