Mortgage Banking

Making sense of commercial real estate finance.

7 Ways to Lower your Financing Costs!

Posted by Jordan Crouch on October 11, 2007

Here are seven ways to keep your financing costs down.

1) Don’t argue with the lender’s attorneys. It just adds billable hours to the attorney’s bill which will get passed on to you the borrower. Loan documents are pretty standard nowadays. Unless there is a MAJOR issue, don’t nick-pick the loan docs. (Savings of $5,000 to $20,000)

2) Find your old reports. A few of the reports you might have include an appraisal, environmental, structural, and ALTA report to name a few. Most of these have a shelf life of 6 months. After that a lender will require a new report be done. So how does this save you money? Call the guy who did the report. He will already be familiar with the property and should be able to do another report for less money than having someone else do a new one. FYI- A good mortgage banker should handle this for you! (Savings of $500 to $2500)

3) Watch the maturity date of the current loan. Make sure you pay off your current loan on or before the maturity date. Most lenders will charge a per diem for each day after the maturity date that you haven’t paid off (or refinanced) your old loan. Usually the per diem is a percentage of the loan amount so it can add up quick. Keep in mind that a typical loan takes 45 to 60 days from start to finish, so planning ahead is important. (Savings of $100s to $1000s)

4) Don’t payoff too early. Most loans will have a prepayment penalty with a small window near the maturity date when there is no penalty. The penalty lessens as you get closer to that open window at the end of the loan. If you time it right, you can refinance your loan during that window and avoid a costly prepayment penalty. (Savings of 1% to 6% of the loan amount)

5) Choose the right type of lender. Certain lenders charge more in fees, require larger reserve accounts or need more reports that other lenders. A competent mortgage banker will know which lenders have the lowest costs. Next week look for a post on the different types of lenders. (Savings depends on lender)

6) Lower the LTV. The more money you put down on a purchase, the lower your Loan To Value ratio will be which can sometimes get you a slightly lower interest rate. (Savings of several basis points)

7) Work with ONE mortgage banker. If you work exclusively with only one mortgage banker, he/she may give you a discount on the fee you are charged. (Savings depends on deal size)

Keep in mind every loan is a unique situation and each lender is a little different. With that said, you can save yourself a big chunk of change if you plan ahead, work with competent people and know what to expect.

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