Guide
Commercial mortgage fees, and the one that compounds
Updated
Commercial mortgage fees are larger than residential ones and they are structured differently. One of them quietly costs several times its headline if you take the option most borrowers take.
The arrangement fee
Normally a percentage of the loan, and normally offered either as a payment on completion or as an addition to the advance. Adding it is easier on cash and more expensive: you then pay interest on that fee for the entire term.
The calculator on this page shows fees separately from the loan for exactly this reason. Price it both ways before choosing the convenient one.
Valuation and legal
You pay for the lender's valuation and usually for the lender's legal costs as well as your own. Both are payable whether or not the loan completes, which is why appetite questions belong before instruction.
Ask for an estimate of the lender's legal costs in writing. It is a real number and it is frequently omitted from a comparison that focused on the margin.
Broker fees
Commercial brokers may be paid by you, by the lender, or by both. None of those is improper and all of them should be disclosed.
Ask directly: are you paid by the lender, by me, or both, and how much. A broker who answers plainly is telling you something useful about the rest of the relationship.
The cost of leaving
Early repayment charges on commercial facilities can be substantial and are often tiered by year. If there is any chance of selling or refinancing inside the term, this is the clause that decides whether that is affordable.
Get the exit position in writing at offer stage rather than reading it in the facility letter a week before completion.