The cost of capital is a huge concern whenever you’re buying commercial real estate because it represents the amount of additional value you will need to break even on the purchase. For businesses buying operational facilities, the cost represents additional monthly overhead the company must handle. It’s no wonder that so much advice about real estate investing builds on the right ways to choose a loan and contain its costs. When it comes to long-term financing, commercial mortgages are usually the least expensive option, but it’s still important to fine-tune them as much as possible for cost efficiency.

Shop for Your Best Rate

The importance of shopping for the right lender can’t be overemphasized. Even small variations from today’s average interest rate can lead to huge cost savings over the course of a 10 or 20-year loan. In fact, it’s a great idea to apply for financing from more than one lender, so you can see the actual interest offers alongside additional finance charges for things like loan origination. It helps you keep an eye on your total costs for the loan, and it also lets you see the difference between a program’s posted best rate and the one they offer to you.

Keep Your Credit Scores Healthy

Commercial real estate lending is all about risk mitigation. Having a valuable asset like property and the down payment that lets you start with equity in it goes a long way. A good credit score goes even further. Your income and the asset’s value demonstrate that you can pay while providing a way for the lender to recoup the loan costs, but your business credit score is what lets lenders know whether you are currently having trouble keeping up with debt. This, in turn, provides them with insight into how likely you are to make late payments or default.

Often, the business credit score alone is enough to qualify for financing. It is still a good idea to keep your personal score well-groomed, especially if you are the sole owner of a business. Owner credit checks are very commonplace in commercial real estate financing.

Make Early Payments

The faster you pay down the principal, the less interest you pay every month. Even if you do not have a concrete plan to pay off the loan in a certain block of time, early payment helps speed up the end of the loan and saves you money by making it possible for your regular payments to have a larger impact on the principal balance. That’s essential to keeping your cost of capital low.