A commercial mortgage loan, as the name suggests is taken for bettering commercial gains. Such a loan has a wide variety of uses ranging from business expansion to buying of commercial properties or even for starting a business.
Commercial mortgage loans are a great help for all businessmen, especially those who are in the phase of business expansion or even starting out afresh. Business mortgage loans are also availed by those who don’t have enough finances to buy a new property or indulge in new developmental & constructional activities. With such a type of commercial mortgage finance you can buy business complexes, retail outlets, office buildings, etc.
For availing such a loan usually the property you are buying is kept as collateral till the repayment of the loan amount. In such cases the credit value or the equity of your commercial property is of more importance than your own credit record.
Apart from the fact that foreclosure of property is a fact that looms large over business mortgage loan, there are many advantages to such a loan. The interest rate charged here is low and mostly accompanies flexible repayment options. Before you take a loan, plan out the details as to why the loan is required or what development or repair or improvement work is to be done. Such details will be required for sanctioning the business mortgages loan.
The size and repayment details of your commercial mortgage loan will largely depend upon the size of your firm and the proportion of money required.
We feature here certain advantages and disadvantages of a commercial mortgages loan:
The interest payment on such a loan is tax-deductible. The repayments can be made with pre-tax a fund, which gives you a tax break.
In a business mortgage refinance you can retain hold of full ownership of the property. Rules state that the lender can claim an interest return only on the mortgage and not on the percentage of the ownership.
With flexible repayment schedules you can easily manage your finances efficiently and plan them accordingly.
One can maintain a smooth cash flow with a well planned commercial mortgage financing. Lower up-front payments help make the capital accessible.
The biggest disadvantage of a commercial property loans is the foreclosure of the property in case of non-payment
Default penalties are also applicable in case of missing a payment or bankruptcy
Most commercial mortgage lenders look for the Loan-To-Value Ratio apart from the credit score. A broker for a commercial loan mortgage will also assess your financial condition and the equity of the property. Some lenders ask for a down payment of 20 percent of the purchase price. Commercial real estate loans have varying tenures with averages from about 10 – 30.
The availability of hundreds of commercial mortgage loan online and also in traditional forms adds to the complexity of finding a proper commercial mortgage rate as well as a broker / advisor who can take you through the process smoothly and guide you to obtain a commercial mortgage loan. One must therefore exercise caution in finding the perfect commercial mortgage.