27 Feb

Need a Commercial Mortgage?


Posted by: Pierre Pequegnat

If you’re an entrepreneur, business person or commercial investor then you probably have or need a commercial mortgage.

Where should you start? 

Do you call your bank, or do you call a commercial mortgage broker?

I recommend you call your bank.

Yes, that’s right; I’m a commercial mortgage broker and I am telling you to start with your bank (unless you are already out of time).

Most business people have financial resources, a good credit rating and a relationship at a chartered bank or credit union.

Common sense says:  start with a commercial account manager at your bank.  Take your documents with you:  financial statements, your mortgage request (written down), latest appraisal (if completed) and any lease agreements.  Tell your account manager you want indicative rates and fees before moving forward with a mortgage application.

Spend thirty minutes in the manager’s office, no longer.  Do this quickly; don’t waste time.  After all, this is just one lender and you have no idea whether your bank is competitive or even if it wants to do the loan.   Tell your banker you need an answer in two days.  If the account manager cannot give you an indicative rate and fees in a short timeframe, you are speaking with someone who will ultimately cause you headaches down the road.

Once you have the bank’s rates and fees, it’s time to verify the information with a commercial mortgage broker who has access to multiple lenders.   Now, you could call ten lenders yourself, but again, common sense says that would be a waste of time.

Call your friendly neighborhood commercial mortgage broker.

Depending on who you call, the commercial mortgage broker will do one of three things:

  • ask you to sign a representation agreement,
  • give you a song and dance about the low rates they have achieved for clients, or
  • tell you the truth.

Top commercial mortgage brokers cut to the truth.

Why?  They are busy.  They don’t waste time on deals they can’t close.

As a commercial mortgage broker, it makes no sense to sign a representation agreement until I know I can add value.  Step one is simply to determine whether the mortgage is bankable.  To do this, I need documents.  Yes, top commercial mortgage brokers are like bankers.  With the right information, transactions can be digested in 20 minutes and can be summarized in six pages or less.

Top commercial mortgage brokers say things like:

  • tell me about your deal in 5 minutes or less; nature of transaction, deal size, legal structure, cash flow, quality of financials and timeline.
  • What documents can you send me?  I’ll review them in 24 hours and call you back.
  • Have you called your bank yet?  What rate did they give you?

Tell your commercial broker the truth.  If your bank offered 4.5% fixed for 5 years then say so.   Why?   Because no one wants to waste time.   Your commercial mortgage broker doesn’t set the rates; the lenders do.  Your commercial mortgage broker knows when a rate makes sense and whether lower rates are available.  For example, if I can’t save you 25 basis points (that’s 0.25% per year), the reality is, by the time we pay to move the mortgage to another lender, you’re probably better off taking your bank’s initial offer.

Top commercial mortgage brokers understand this, and they will be truthful with you.

“Hey, if you have 4.5% fixed in this market for that building, in that area; take it, don’t hesitate; it’s a good deal.”  I say this to entrepreneurs who call.  It serves no one to enter an agreement that won’t add value.  In fact, its our fiduciary duty to tell you.

Some entrepreneurs say they already have good rate (even when they don’t).  “Oh, my bank offered me between 4.6 and 5.2%.”  The thinking being, if they imply they have 4.6%, then the broker will work even harder to get a lower rate.

Beep.  Wrong.

Brokers don’t set the rates; lenders do.  This just muddies the water.  If the broker thinks you already have a good rate (and best-in-market is 4.5%, only 10 basis points less), then the broker will move on right away.

About Commercial Mortgage Brokers

All a commercial mortgage broker wants, is serve you; and that means delivering the best rates and terms.  There is no financial incentive for a broker to hold back information or low rates.  Similarly, holding back your bank’s interest rate just wastes everyone’s time, including yours.

As a commercial mortgage broker, if I think I help you, I’ll tell you right away.  I’ll review the deal quickly, determine if its bankable and touch base with a few lenders.   If lenders express interest, I’ll call you to discuss what they told me.

Transparency and open communication are the keys to saving time and to getting the most from your commercial mortgage broker.

If you are getting a runaround and want the straight scoop, call me.

Next Blog:  How to Vet a Commercial Broker.

Pierre Pequegnat is Principal Broker for DLC Sherlock Mortgages (647-995-4943).  He has more than 20 years of commercial banking, credit adjudication and consulting experience.  He holds an MBA from York University and a BASc. in Mechanical Engineering from University of Toronto. He teaches Corporate Finance, Real Estate Finance and Growth in SMEs as an adjunct professor at Ryerson University.

22 Feb


Residential Mortgages

Posted by: Pierre Pequegnat

According to a recent case tried in the Court of Appeal for Ontario, Winters v Hunking, 2017 ONCA 909 as summarized by Scott McGrath of WeirFoulds LLP, Foreclosure is not automatic on default.

In an interesting article posted December 8, 2017 in Mondaq, Scott McGrath reminds us that the Court may have acknowledged the Lender was within their rights to commence foreclosure proceedings, but special circumstances “made such a foreclosure unjust in the circumstances”.

Special Circumstances an issue
The case involved a $350,000 mortgage granted to the Lender by Mr. Hunking. He made no payments on the mortgage, nor apparently did he pay his realty taxes. These facts were never in dispute, however a significant degree of sympathy was accorded the Mr. Hunking, the Appellant. It was established that he was illiterate and low income. According to his doctor he was also “severely mentally challenged”, with “significant cognitive impairment”. One might conclude that on the face of it, the Mortgagor was clearly in default, and the Lender was within their rights to exercise whatever remedies were available to them. The individual’s condition however, would possibly inform us as to why he did not respond to foreclosure proceedings.

Appeal Court Considerations
The lower court had refused to set aside the default judgement ordering foreclosure. The motion judge was not convinced that the facts were such as to persuade him to set aside the original order. The Court of Appeal took a different interpretation, raising a number of issues, including, importantly, that a Foreclosure action would prevent the mortgagor from accessing considerable equity in the property, thus providing the Lender with a windfall.

What is the take-away here? Quite simply that a foreclosure is not a guarantee. A sympathetic mortgagor may get the court’s sympathy, which could have significant implications for the lender.

Allan Jensen


Dominion Lending Centres – Accredited Mortgage Professional
Allan is part of DLC The Mortgage Source based in Ottawa, ON.