When Federal Reserve policymakers signal a potential rate hike, commercial mortgage brokers would do well to consider the potential effects of rising interest rates on the mortgage market and what they need to do in order to keep their business strong.
One of the best ways to increase your business and maintain a steady flow of income is to diversify your product offerings. If you’re currently closing residential or commercial deals exclusively, now is a great time to add small-balance commercial mortgages to your mix. However, when seeking out lenders that will fund these types of deals, it’s best to stick with those who offer fixed rates and fully-amortizing terms, as rate movement may be accelerating.
For those just getting started in the business, a loan with a fully-amortizing payment simply means that your borrower will have a periodic payment, and if they make these payments according to the mortgage’s amortization schedule, the loan will be paid in full by the end of their term. If you secure a fixed-rate mortgage for your borrower each fully-amortizing payment will be the same amount.
A fixed-rate, fully-amortizing commercial mortgage is beneficial to borrowers because they won’t need to worry about the note coming due and making a large balloon payment at some point in the future. This kind of security is valuable in today’s current rate market. Because of this, these types of loans will be easier for brokers to sell to their borrowers.