Not surprisingly, mortgage borrowers often go straight to their own Banker. And why not? It’s an established and comfortable relationship. Perhaps it’s viewed as the path of least resistance. But is it the right lender for the borrower’s current specific needs? Perhaps not.

Aren’t all Lenders pretty much the same?
Borrowers may think that all institutional lenders are pretty much the same, offering comparable rates and standardized borrowing terms. This is rarely the case. Lenders often prefer one asset class over another. They may have a particular need for one type of loan. A specific length of loan term may be desirable for funds matching purposes. Real Estate risk is a fact for real estate lenders. How they mitigate this risk differs, however. It may be stress testing interest rates during the approval process. Sophisticated risk pricing models may be used, having regard to previous loss experiences. The lender may rely significantly on collateral value or guarantees. The conditions precedent to funding will often differ from lender to lender.

A real-world example
I had the pleasure last year in advising a client who had 3 sizable real estate assets in 3 quite distinct asset classes. The borrower’s loan amount requirements were significant, however, they were flexible on loan structure. Accordingly, I sought out competitive yet differing deal structures. My goal was to provide a competitive array of options. A number of “A” class lenders were approached, several/most of whom this particular borrower had no previous experience with. I shortened the list to 5 lenders and received Term Sheets from each.

Each Offer was competitive on a stand-alone basis but they differed quite substantially in the following ways:

• Loans were either stand-alone, blanket loans or some combination.
• Length of terms offered differed by asset class.
• There was as much as a 75 bps rate difference from highest to lowest Offer.
• The amortization period depending upon asset class ranged from 15 to 25 years.
• Loan amounts on individual assets differed as much as 20%.
• Third party reporting requirements differed between lenders.
• There was a combination of fixed vs. floating rate loan structures.
• Recourse was limited by some lenders on select assets or waived entirely upon a higher rate structure.

Leverage Your Knowledge
These variances are striking yet each of the 5 lenders was considering the same asset at the same time with common supporting information from which to base their analysis. How was the borrower to know which offer to exercise? As a Broker, I can add value by helping the borrower to consider both their immediate and longer-term strategic requirements in the context of their overall real estate portfolio needs. This was precisely how this borrower landed on the most appropriate Offer for their particular circumstances. In this particular case, we presented different yet competitive and uniquely structured options for the borrower’s consideration.

Consider a Dominion Lending Centres Mortgage Broker when next in the market for financing. Leveraging a Broker’s knowledge is a tremendous value proposition.