One of the most interesting aspects of commercial real estate lending is the fact that every client has a different story and unique needs. Whereas residential brokers operate in a world of “comparables,” commercial brokers often close deals that can’t be compared to anything they’ve done in the past.
That said, if you’ve worked in the commercial mortgage industry long enough, certain borrower situations can become familiar. One well-known case is the borrower looking to refinance their bridge loan. Borrowers enter into loans with hard money lenders for a variety of reasons, but they usually have one thing in common: A desire to take out the bridge loan with more conventional financing once they are able to do so.
Of course, any college student can tell you that not all take out is created equal. If your client is currently looking to take out their bridge loan with a new deal, it’s up to you to identify a lender that will work with your client and meet their needs.
How can you find the right take out solution for your client? Easy. Check the menu.
The Hard Money Deal
Nearly 2 years ago you had to find a quick solution for your borrower when they needed to secure funding on a multifamily property that was about to go back on the market. In order to get the deal done in a short amount of time, your borrower accepted a high interest rate and lender-friendly terms.
Now that the term is about to come to an end, your borrower is looking to refinance. They want a better deal than the one they took when they were in a time crunch.
Your borrower may want to try to refinance with a bank, but you know that even if they get approved it may take too long to close the deal. On the other hand, your client may feel there are no other options than a hard money solution if the bank turns them down.
Non-bank lenders like Silver Hill Funding have favorable terms when compared to hard money solutions, and they offer more certainty of funding than traditional bank lenders.
The Non-Traditional Lender’s Menu
Lenders like Silver Hill are typically more flexible than banks. Non-traditional lenders offer longer terms up to 25 years with rates much lower than hard money. A non-bank lender could be a good solution for a borrower who wants to take out their bridge loan because these lenders offer better terms than hard money lenders and complete transactions faster than banks.
- Streamlined underwriting process typically results in faster closing time
- Ability to finance credit-worthy borrowers or transitional properties
- No seasoning requirements
How to Identify a Borrower in this Situation
Hard money lenders are known for quick closings and lender favorable terms. Most borrowers who take a bridge loan are not looking to keep the loan for very long as the interest rates are high and the term is only for 6 months to 5 years. Many times they needed quick funding to acquire a property in need of repairs. Once the property has improved, borrowers are motivated to find refinancing for better terms.
These are the types of borrowers you should search for when trying to find opportunities to close more deals. Ask your current clients or network of other brokers if they know any borrowers who want to take out their bridge loan.
The Right Take Out Solution
We’ve all had good take out and bad take out. Many times all it takes is a glance over a menu to know right away if the place you’re at has good take out. Just as such, you can review the programs a lender has to find out if they would be a good match for your client.
Make sure you completely understand your borrower’s needs and motivations to narrow down a list of lenders in order to provide the right take out solution for your client.
If you have a client looking to take out their bridge loan, become an approved Silver Hill broker and spin them to a program with us.