Commercial Mortgage Financing

Commercial real estate financing is based on finding sources of funding that are consistent with project requirements and providing funds that can be equity or debt to close the deal. Equity represents a cash injection into a real estate project by partners, joint ventures, etc. to provide the necessary financing that is needed and is not a loan. Equity providers become co-owners in a commercial real estate project and their ownership interest is determined by their contributing funds, ownership vehicle or partnership agreement. The equity involved may also be cross-secured by other commercial real estate holdings to meet the equity infusion requirement. The advantages of this agreement are that the funds are not borrowed and do not have to be repaid. However, the equity partners participate in the downside and upside potential of the project and may be compensated during the operation and/or sale of the project, depending on the agreement inherent in the company. There may be conditions that indicate whether equity partners receive compensation first before distributing cash flow, and other conditions for the distribution of funds or equity realized from the commercial real estate project.

Debt is essentially a loan granted to provide the necessary funds to meet the required loan to value (LTV) as a condition of financing. The borrower is still required to make a down payment or equity to qualify for financing, appease the lender with the risk of personal funds alongside lender funds, and meet the underwriting requirements for the borrower’s involvement. There are many sources of commercial real estate financing that are ubiquitous in various markets. They represent sources of financing that are compatible with the project requirements and provide debt financing if necessary and perform an essential function in the field of commercial real estate financing, examples of which are:

Commercial banks

Mutual savings banks


Life insurance companies

Pension and pension programmes

Private lenders

Foreign lenders

Credit unions

Mortgage Bankers

Mortgage brokers

The last two, mortgage bankers and mortgage brokers, are primarily intermediaries between sources of credit and borrowers, with some mortgage bankers financing and/or participating in some of their operations or acting as correspondence for selected lenders, with responsibility for participating in lending up to closing and servicing the process, including overseeing the underlying collateral, which secure the loan after financing. In this capacity, their participation in a loan may include the granting of the loan, the collection of payments, the examination of the underlying collateral, the sale of the loans to investors and / or the supervision of enforcement proceedings, etc. Mortgage brokers broker deals to lenders and receive a placement fee for their service. Their knowledge of the mortgage industry and its lender relationships are paramount to increasing the financing success rate for projects as financing requests are reviewed and viable deals are matched with interested eligible credit sources.

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