Updated: Dec 26, 2022
Well, the short answer is that you don't have to if you don't want to!
Anybody looking for a commercial mortgage is quite at liberty to apply and negotiate directly with any commercial lender – although there are some commercial mortgage lenders who will only deal with professional brokers.
To be realistic, the real question is do I have time to keep track of all the product changes, offers, restrictions and opportunities that constantly change? Because building up a network of commercial mortgage lenders is a full time job for a commercial finance broker. Not many business people, property developers or investors have the time to keep their fingers on the pulse of this ever changing market place.
Anybody who does not at least consult a commercial mortgage broker for free advice is possibly depriving themselves of a significant advantage when it comes to getting the best deal.
Maybe the real concern most people express is Do I have to pay a broker fee? Again the short answer is ‘No’ – for the majority of cases there is no real reason for a broker to charge a fee for arranging a standard commercial mortgage. This is because a broker is usually paid by the commercial lender supplying the funds. However, on the rare occasion where the negotiations become disproportionate to the anticipated revenue it can become necessary to agree an appropriate fee.
Independent commercial finance brokers work closely with mortgage lenders at both ends of the property lending spectrum. Their experience enables them to know where a particular project will ‘fit’, and may also help them to find a solution that is possibly more appropriate than the ‘obvious’ one the client was expecting. The broker’s avowed aims should be always to provide a solution best suited to the clients circumstances and requirements.
As stated at the outset, the choice as to whether or not to use a commercial mortgage broker rests solely with the borrower. In the real world there is no earthly reason why a business or individual with a provable income, clean credit history and sizeable deposit should need any help. In that situation the mainstream banks are falling over themselves to offer very attractive commercial mortgage rates.
The commercial mortgage market is evolving, lenders are now eager to help start-up businesses, companies with bad credit records, and even businesses with no accounting information. These are probably the types of businesses who benefit most from the services of a commercial mortgage broker.
Aside from the obvious time saving advantages, using a commercial mortgage broker has many other benefits. However, the onus is on the client/borrower to be completely honest with their broker. Full details of any previous credit problems, missed mortgage payments or disgruntled suppliers etc. need to be disclosed right at the outset.
When working with a commercial mortgage broker it is essential to establish right at the outset whether or not a fee is payable. Never pay any fees up-front, and always ensure that you have read and understood the full terms of any brokerage agreement. There are many very competent and professional commercial mortgage brokers in the marketplace who are willing to help without charging exorbitant fees.