When seeking commercial mortgage financing, accurately describing to your lender, the proposed sources and anticipated uses of the financing requested is fundamental. Whether you, or your mortgage broker are preparing your loan proposal, don’t leave your lender guessing!
What is the purpose of the requested mortgage?
Are you buying a property? What are you paying? How much equity are you injecting? Is there a VTB or other secondary financing, and if so, how much, what are the payments, and when is it due?
What is the purpose of the acquisition? Are you a long term buy and hold investor, or are you planning to re-position and sell in the short term?
Perhaps you intend to pay off another loan? Are you refinancing maturing debt only? Seeking to lower your interest rate, lengthen your term, or modify your amortization period are all legitimate strategies.
If you are seeking “new” money by “releasing equity”, what are the funds earmarked for, and when? Perhaps you positioning yourself to acquire another property, or are planning renovations on the current one?
Are you planning to construct a building? If so, what is the cost of the land, or if the site is already owned, is there presently financing on it? Is there a fixed-price construction contract in place? With whom, and for how much? Has the property been pre-sold or pre-leased? How will the construction loan be repaid?
Perhaps you need a short term loan to make improvements to the property, prior to securing permanent financing? What is your strategy? Perhaps re-zoning, building repair, re-tenanting, or property conversion? What is the bridge loan repayment strategy?
Clearly articulating the purpose of the proposed funding, as well as detailing both the sources and uses of funding, is of utmost importance when you or your mortgage broker presents your proposal. Your request for financing, is not unlike a business case. Your lender needs to know, at a glance, what your financial program is. Sources and Uses of funds, as an initial step, is an important and relevant piece of information that will assist your lender to render a positive decision on your request. Finance your Income Property Like a Pro! Learn more here.