What Is a Commercial Mortgage?
A commercial mortgage is a loan taken out on commercial real estate by a business or company. A commercial mortgage allows the purchaser to borrow a percentage of the value of their property, under the promise to repay the loan over a set period. Many business owners may utilize a commercial mortgage to grow their business venture.
Commercial mortgages are not just for real estate. Many business owners will choose to get a commercial mortgage to invest in the growth of their business, such as covering the costs of hiring more employees or purchasing new equipment. Commercial mortgages are also commonly used for financing multi-residential properties
How Does a Commercial Mortgage Work?
A business may choose to invest in a commercial loan when financing a new property. Many companies will utilize this loan to grow their business, while the lender will use the property value as collateral against the loan. In the case that the borrower cannot repay the mortgage, the lender will repossess the real estate.
For more information about investing in your business venture with a commercial mortgage, get in touch with our brokers today.
What Deposit Is Needed for a Commercial Mortgage?
A commercial mortgage requires a higher down payment than residential properties. However, your risk profile will determine your required deposit. Typically, a down payment of 20%-35% is required for mixed properties, and close to 50% is expected for a pure property.
How Many Years Is a Commercial Mortgage?
Commercial mortgages tend to have a shorter conventional term than that of residential mortgages but can be anywhere from 1 to 25-years with an amortization period of up to 30 years. It’s important to note that interest rates are also higher due to the increased risk.
How to Qualify for a Commercial Mortgage?
There are specific criteria to meet in order to qualify for a commercial mortgage.
- Debt Service: Lenders will use this metric to determine the borrower’s risk level. This criterion will establish the available cash required for a loan and will assure the lender that you can pay off your loan and obligations. Your risk level will also determine your down payment.
- Credit Score: A good credit score shows your business’ credibility.
- Business Status: An up and running business shows your lender that you are profitable and steady. If your business isn’t currently up, you will need to provide a plan and financial projections.
Invest in a Commercial Mortgage Today
Investing in a commercial mortgage for your business is a big decision and should not be made without the guidance of a trusted expert. The team of brokers at Today's Mortgage Choice has been guiding business owners through mortgage endeavors for years. We will take the time to get to know your business before recommending suitable options.
Get in touch with us to set up your appointment today!