Commercial Mortgage Funding
Commercial real estate funding is predicated on finding financing supplies compatible with project requirements and providing funds which can be equity or debt to consummate the deal. Equity represents cash infusion into a real estate project from partners, joint venture, etc to provide the necessary funding which is needed and is not a loan. Equity contributors become co-owners in a commercial real estate project and their ownership interest is determined by their contributing funds, ownership means or partnership agreement. The participating equity can be cross collateralized from other commercial real estate holdings in addition to fulfill the equity infusion requirement. The benefits of this arrangement are that funds are not borrowed and not required to be paid back. However, the equity partners participate in the downside and upside possible of the project and depending on the agreement inherent in the venture may be compensated during the time of operation and/or when the project is sold. There might be terms suggesting if equity partners receive compensation first before dispensing of any cash flow and other terms and conditions of dispensing of funds or equity realized from the commercial real estate project.
Debt is essentially a loan given to provide the necessary funds to satisfy the required Loan to Value (LTV) as a condition of financing. The borrower is nevertheless required to provide a down payment or equity to qualify for funding, appease the lender with risking personal funds alongside lender funds and fulfilling underwriting requirements for borrower’s funds participation. There are many supplies of commercial real estate funding pervasive in various markets. They represent funding supplies compatible with project requirements and providing debt financing as needed and fulfill an basic function in the commercial real estate finance arena, examples of these supplies are:-
Mutual Savings edges
Life Insurance Companies
Pension and Retirement Programs
The last two, mortgage bankers and mortgage brokers are chiefly intermediaries between lending supplies and borrowers with some mortgage bankers funding and/or participating in some of their deals or acting as correspondences for select lenders with the responsibility of involvement in the loan origination to closing and servicing course of action including overseeing the inner collateral securing the loan after funding. In this capacity their involvement in a loan can include originating the loan, collecting payments, inspecting inner collateral, selling the loans to investors and /or overseeing foreclosure proceedings, etc. Mortgage Brokers source deals to lenders and receive a placement fee for their service. Their mortgage industry knowledge and lender relationships are paramount with increasing the funding success rate for projects as a consequence of screening funding requests and matching viable deals with interested capable lending supplies.