4 tips to get Commercial Property Loan

If you are already investing in residential properties and want to start investing in commercial properties, then this article is for you. Investment in commercial properties is not common and sometimes it can be daunting in comparison to investment in residential property. You might be wondering about the right process to get a commercial property loan. Here are 4 important tips to get commercial property loan like a pro.

1.      Specialized Commercial Lenders

Although people are not much aware about the commercial loans but a lot of options are available. Various specialized lenders like newcityfinancial.com can help you in the best possible way. The benefit of using a mortgage broker familiar with commercial lending is that second tier lenders are usually accessible to them and these second-tier lenders specialize in the commercial lending.

2.      Low Loan-To-Value Ratio on Commercial Loans = Large Deposit

It is seen that residential property borrowers can borrow up to 95 percent (maximum) of their property’s value (LVR), but the borrowers of commercial property are not allowed to get more than 70 percent (LVR) of their property. It simply means that you will either require a large deposit or will be able to gain more liquidity.

3.      Short Loan Terms

A normal tenure of a residential property is 30 years, whereas in case of commercial property, it is usually 15-20 years. This means that the borrowers will require to show the lender a great repaying capacity. The repayment amount will be high because the principal should be repaid in a much smaller time frame. You should show a strong serviceability with regard to your lease agreement, pay slips and rent agreement on different properties.

4.      Different Terms of Lease

There is a complete variety of lease terms with respect to commercial property and few leases even provide incentives and benefits which can enhance the loan application of an applicant. For example, the lease length and tenants paying the outgoings. Most of the residential leases are of 6-12 months whereas the lease duration of commercial properties is longer like 5+5 years or 3+3 years and they further have the options to be extended for next 3-5 years.