Whilst helping a friend work out the costs involved in raising a commercial mortgage recently I suggested that they use a commercial mortgage calculator. It turns out that this simple piece of advice actually involves a lot more work.
With home loans it is quite easy to find a calculator which will quickly display the total costs involved in setting up home loan. Despite the fact that the principle behind both mortgages is the same, it is quite hard work finding a good quality commercial mortgage calculator. But, lets take a step back and consider what exactly is the point of finding a calculator:
To establish the basic costs of borrowing a fixed amount of money.
If a business takes out a loan over the full term of a mortgage then the interest rate is the single biggest factor, however what most commercial mortgage calculators do not take into account is the costs associated with arranging the finance. Given that the vast majority of commercial mortgages are refinanced inside 10 years you must factor in the set up costs, administration fees, and any early repayment charges.
To compare 2 or more commercial mortgages side-by-side.
Shopping round is is vital, so it’s perfectly reasonable that you might end up with two or more quotes from different lenders. Using a simple mortgage calculator you can quickly assess the impact of small interest rate variations on your day-to-day cash flow. This is particularly useful when comparing a fixed rate to a variable mortgage rate.
To double check whether an existing quote is accurate.
Thankfully commercial mortgage brokers are coming under increasing pressure to disclose fees, however there are still some who will try to hide the true figure. One way of doing this is to provide a business client with mortgage illustration showing the repayments based on the loan amount, but actually putting the broker fee onto the loan amount without adjusting the repayments. Using a simple mortgage calculator will immediately spot if there is a discrepancy in the loan amount.
Using a commercial mortgage calculator can really help a business workout the true cost of finance and compare mortgages.