Commercial Property Mortgages
April 12th, 2013 by Tatyana Levin
If you are considering buying a commercial property, you are probably going to need some sort of financing. If you have the capitol to pay for a building out of pocket, great, but the vast majority of people do not.
The most viable source of money is a loan from a bank in the form of a mortgage.
You’re probably familiar with a mortgage when buying a residential property. Getting a mortgage for a home that you are going to live in is slightly different than a mortgage for an investment property, but a mortgage for a commercial property is a totally different ball game.
It’s significantly harder to get a commercial mortgage than a home mortgage. Many home mortgages are backed by the government, meaning there is much less risk for lenders to give out a home mortgage, not to mention that a home mortgage is usually a lot less than a commercial property mortgage.
Because of the risk involved, interest rates are also higher.
When getting a commercial mortgage, the property acts as collateral along with the business itself. This means that if you cannot may your loan back, the lender can take your business. Stakes are high when it comes to commercial loans because the loans are so big.
With home mortgage loans, credit is one of the most important determining factors for deciding whether you are eligible for a mortgage and if so, at what interest rate.
A commercial mortgage doesn’t completely ignore your personal credit, but it is a much smaller factor. The greater determining factor is the viability of the business. The potential lender goes through financial documents to see if your business can/will actually be able to repay the loan.
If the commercial property is bought as an investment, lenders would look at the viability of space being rented out and ultimately increasing in value.