The commercial property real estate market is full of opportunities but can also be a sizeable investment for businesses and individuals. If you are planning to enter the market and are researching commercial mortgages and commercial loan programs this blog post contains some helpful information to start your search. The first item to understand is the similarities and differences between commercial and residential mortgages.
The biggest fundamental difference is that the collateral for this loan type is required to be a commercial building or other business real estate and is not residential property. Secondly, with commercial mortgages the qualifications follow a different standard. When applying, financial institutions look at the property and the income stream it will generate compared to residential mortgages in which lenders mainly look at the borrowers financial and credit history. One tip to consider is that personal credit is still a factor in commercial mortgage loans, as the investor will want to know you have a good history of paying off previous debts. Down payments also differ, with the rates being much lower for residential mortgages. With rates for commercial loans typically requiring 20 percent down it can really impact your property investment location and strategy.
The length of payment is also a factor where commercial mortgages with balloon payments can be amortized over a longer period of time but have a shorter term payout date. This type of commercial mortgage is great because it involves low monthly payments; however the downside is at the end of the term you’re left with a large, or ballooned, dollar amount comprising the remaining interest and loan principal. It is important to note here that when the term is due, the borrower will most likely refinance the loan or sell the property to make the final payment. Other commercial loan types are available, and include the following:
- Working Capital Lines of Credit
- Small Business Administration Loans
- Partner Buy Out
- Business Acquisition Lending
- Equipment Finance
- Accounts Receivable Lending
Now that you have a brief overview, it is important to select the right lender…one who is knowledgeable and has the industry experience necessary to help you through every step of the process. Integrity Financial Services is experienced in commercial loan arena and is available to help you decide which commercial loan is right for you. Contact us today at 1-877-760-9854 to find out more information.