With interest rates nearing a 50-year low, common wisdom says get the lowest rate fixed for as long as possible – but what does capital wisdom say?
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| Rates nearing a Fifty-Year Low Chart courtesy of Federal Reserve Bank of St.Louis |
I work with a wide variety of lenders to get them to put forward the most competitive rates they can offer. But just as important, I work closely with my borrowers to explore their full range of requirements so that we can match the best fitting loan option to their unique situation. The best match is not always the lowest interest rate.
Lowest rate may mean lowest payment, but may not always mean best deal.
Evaluating various loan quotes and selecting a lender can be a process of comparing apples and oranges and it’s tempting for borrowers to focus on two quantitative measures… the interest rate and the amount of the loan. What other criteria should be weighed in selecting a lender?
Over the life of the loan other issues may represent additional costs, require extra borrower resources, cause delays or even introduce business risks. The list below is not exhaustive, but represents common questions we cover:
- Does the lender have a reputation of being reasonable and responsive?
- What flexibility can be built into the loan documents?
- Who will service the loan?
- Will the information you submit for the loan request be made public to potential CMBS bond buyers and thus potentially to your competitors?
- When in the closing process will the interest rate be locked in?
- Is the loan assumable; if so can you cleanly get off of any guarantees?
- How often will you need to give the loan servicer rent rolls, operating reports and financial statements?
- Will all or most leases need lender’s approval?
- What is the likelihood of being re-traded during the due diligence or closing process?
As a borrower, look for a solution tailored to your needs. Calculating a loan payment may be simple math, but calculating its full cost can be a science and selecting the right lender, an art.
