Commercial Mortgage Guide – Make an Informed Choice!
Commercial mortgage is any kind of loan secured on the property which is not a residence. Since, every premise is different so is the loan provided also varies according to the requirement and risk. Here is a basic guide which will help you know more about commercial mortgage and finally you will make an informed choice.
Use of Commercial mortgages
Commercial mortgages are used to help businesses grow and develop. Small business loans are usually unsecured but each of the larger commercial loan needs to be backed with a collateral. This is to reduce the risk of lenders.
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Usually it happens that the property purchased for the business expansion is kept as security. In case the money is required for business operations, then the premise of business is often kept as security. It is seen that in case of buying a business property, 70 percent value of the property is covered by loan and 30 percent is asked by borrower to pay in cash.
Can leasehold property attract mortgage?
A mortgage can be provided on a leasehold property only in the case when 70 years or more of lease is remaining. In adverse case, additional security will be required.
Duration of commercial mortgages
Commercial mortgages are from 3-25 years. There are shorter term loans also available and they are called as property development or bridging loan. Their duration ranges from few weeks to 2 years.
How much can be borrowed?
The property occupied by owner can attract 70-75 percent mortgage. If the property is an investment, the mortgage amount is calculated on the basis of rent generated by it, but in any condition, will not exceed 65 percent of the purchased price.
There is non-refundable fee charged by lender for doing various arrangements. Then, there is Valuation Fees, Legal Fees, and Broker Fees.