Commercial Mortgages And Fees
If you are considering applying for commercial finance, perhaps towards purchasing or renovating a new business premises, then one of the ways of doing this is by way of a commercial mortgage. A lot of people tend to focus on the interest rate that they are going to be charged for the borrowing as this is one of the factors that impacts upon how much the repayments will be.
Another consideration that people seeking a commercial mortgage should also take into account are the fees payable. The range of fees may vary between different lenders and brokers but let us have a look at the most common fees potentially payable depending upon who you deal with.
Arrangement fee charged by the lender
Almost certainly, you will find that the lender will charge a fee for setting up the finance. This fee could either be paid separately by the borrower or added to the loan or deducted from the monies advanced. On occasions, a number of lenders may require a commitment fee that is payable by the borrower should they accept the offer of finance and it is deducted from the amount of the arrangement fee. Should the borrower drop out having paid the commitment fee, it is unlikely to be refunded.
If you are using the services of a commercial mortgage broker to help you source a competitive deal then a fee is usually payable to them for the work involved once an offer has been made by the lender. However, there may be occasions when some brokers charge an upfront administration fee to cover the cost of the work involved leading up to sending the application to the potential lender.
A solicitor(s) will be involved in dealing with any legal works such as helping drawing up the mortgage document for signature by both parties. The borrower would usually be responsible for paying not only their solicitor’s legal fees but also those charged by the solicitor acting for the lender.
The lender will normally take a first legal mortgage over the commercial premises that the borrower is considering buying. Therefore, the lender will wish to know how much the property is worth to calculate the security margin should they have to take possession of the property and sell it to clear the commercial mortgage if the borrower defaulted on the repayments. The services of a professional valuer would be used and the borrower would normally have to pay his or her fee.