Howco Financial Group

Determining Your Commercial Mortgage Interest Rate


Inevitably when we begin a conversation with a prospective client, the subject of interest rates comes up. As we explained earlier, commercial lending is different from residential lending and rate structures for commercial loans are no different. The most important factors in determining rates are the loan-to-value on the property (LTV) and the cash flow that the property produces. To a lesser extent, your financial strength and credit will play a factor as well. We will assist you in providing the lender with an executive summary which will explain what you intend to do with the loan proceeds and how the loan will be repaid to the lender.

You'll also need to understand that rates vary considerably with the length of the fixed rate on your commercial loan. Unlike residential loans, commercial loans normally have a prepayment penalty which can be quite expensive so that might affect your decision on how long a fixed rate to accept. Further, future economic conditions will determine the rate you will receive when it's time to refinance the property if you still own it. We will give you our best advice to assist you in coming to a correct decision.