| From the point of view of a borrower there should be | | | | 5. Is it almost certain that a commercial loan needs an |
| no differences between a residential and commercial | | | | appraisal report and or an environmental assessment |
| mortgage. A mortgage broker looks at those two | | | | report. Whereas a residential loan usually receives |
| from a completely different angle. They are two totally | | | | funding without such assessments - if it is not a |
| different deals altogether. In this article I have tried to | | | | refinance or some kind of Home Equity loan. |
| write briefly about the main differences between them. | | | | 6. Commission to the broker in a normal residential deal |
| Please remember that the backdrop of this writeup is | | | | is paid by the lender. In a commercial deal the |
| Canadian mortgage industry. | | | | borrower pays the broker a fee (generally speaking). |
| | | | This is the most tricky part of this industry. There are |
| 1. A commercial deal is based upon much more | | | | many instances where the borrower gets in direct |
| numbers of parameters than a residential deal. Say for | | | | contact with the lender after the broker arranges |
| example - the running cost of the business, assets, | | | | everything for them. In this process the broker looses |
| history of that business, business plan, financing plan, | | | | his legitimate due towards his efforts. |
| credit worthiness of the owners, personal incomes of | | | | 7. Chances are that a residential deal may be closed |
| the owners, potential income, location, feasibility, | | | | and funded - many times higher than that of a |
| environmental impacts, financial impacts are to name a | | | | commercial deal. |
| few. | | | | 8. A residential deal process is simpler than a |
| 2. A business mortgage may require some other | | | | commercial deal. All a person has to do in the former |
| types of loan other than a mortgage, like bridge | | | | case - is to get the application and consent form |
| financing etc. | | | | signed and run a credit check. After the credit check, it |
| 3. Usually in a commercial loan the goodwill part is not | | | | has to be determined based upon the lenders |
| mortgageable. There are some exemptions to this. In a | | | | underwriters guidelines and client needs - which |
| residential mortgage there are no such factors. | | | | product or products to be offered. In a commercial |
| 4. A residential mortgage amortization period goes | | | | deal there are no clear guidelines. Every lender has |
| up-to 35 years. Commercial lenders are not ready to | | | | their own set criteria. The preconditions are based |
| wait for so long. The reason is - longer the mortgage | | | | upon multiple factors. It takes a lot of pencil sharpening |
| amortization period, higher is the risk in commercial | | | | to get one lender to agree to lend. |
| businesses. | | | | |