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Commercial Mortgage
A commercial mortgage, on the surface, is quite similar to that of its residential counterpart. Both loans enable people to get their hands on a large amount of cash for the purpose of buying a piece of property. Along those same lines, both a commercial and residential loan feature the assessed value of the property as the primary piece of collateral. The difference comes in the use of the property. Commercial mortgages are directed at businesses, instead of individuals looking to purchase a home.
A Commercial Mortgage Loan Is Strictly Business
A commercial mortgage loan is a loan that is sought by a business as opposed to an individual. Though this may seem like a small difference, the real separation comes when considering the loan approval process. Commercial loans are easier to acquire because the business is the one doing the application. Therefore, their credit worthiness is at question as opposed to the credit worthiness of an individual. For many people, this can be an advantage, although business credit is evaluated much differently than individual credit.
Commercial mortgages are also different than residential mortgages in relation to their term. The most common types of residential home loans will be repaid over a period of 30 years, although 15 year mortgages are becoming more common. Commercial mortgages are handled differently, in that the term of the loan is usually shorter than even 15 years. For most commercial mortgages, ten years is the standard time of payment. While a residential home loan is paid in monthly installments, a commercial loan is handled in balloon payments, which require a certain percentage of the loan to be repaid when the term is up. This lump sum can be paid much easier by businesses than it could be paid by individual loan seekers.
Commercial Mortgage Loan Interest Rates
When considering your payment terms for a commercial mortgage loan with the mortgage calculator, one must take into account the higher interest rates that are often applied to this type of loan. While residential loans have become much riskier in this recent market downturn, they are generally seen as being relatively low risk for lenders. Commercial mortgages, on the other hand, are a little bit riskier because of their high volume nature and the often high payments required. This will result in a higher interest rate. Luckily for businesses, commercial loan rates are pretty steady at this point.
A commercial mortgage can be the first step to a business making a name for itself. Lenders are always looking for property buyers who have the ability to pay back their loan on time. For businesses with a good credit record, a commercial mortgage loan is not that hard to come by. It is important for business owners to put in research regarding this type of home loan, though. Because of the complicated nature of the application and closing process, there is much to learn for even the most savvy business owner. Using a amortization calculator, like the one provided to you on our home page, to get an idea of your loan payment is only the first step. There is much more when it comes to commercial loans that must be mastered considering the difference from that of a residential loan, which most borrowers find themselves more familiar.