I have been originating commercial loans for over 33 years now, and it has been my observation that commercial mortgage borrowers are very sensitive to points. Commercial mortgage borrowers will gladly pay a slightly higher interest rate, if by doing so they can reduce the size of the loan fee.
There is some logic in this position. Many commercial property investors trade up to a more expensive commercial property, one with even more depreciation, every five to seven years. Therefore it makes little sense to spend a lot money to obtain a long-term commercial loan, if that commercial loan is simply going to be paid off quickly.
Another example is when a commercial investor has a commercial property for sale. He needs cash now, perhaps to buy another investment property, but his older commercial building simply hasn't sold yet. A commercial bridge loan is perfect for such circumstances, as long as the points aren't too high.
A bridge loan is a fast, short-term, somewhat expensive commercial loan used to cover short-term cash flow needs. Most commercial bridge lenders will be very interested to hear the borrower's exit strategy.
Blackburne & Sons, my private money commercial mortgage company, therefore introduced this week a new commercial loan product, our one-point bridge loan product for commercial properties:
- Interest Rate: 14.9%
- Loan Fee: 1 point + $950 (nothing up-front)
- Term: Six months
- Prepayment Penalty: None
- Maximum Loan-to-Value Ratio: 65% (70% on purchases)
- Properties: Multifamily (5+ units), Commercial, and Industrial