How Business Or Commercial Mortgages Function

It is seen that a commercial mortgage lasts for anywhere between 1 year to a maximum of 15-20 years and the maximum borrower can get in case of commercial mortgage is around 65-70 percent of the LTV (Loan-To-Value). Most people think about commercial mortgages but are unaware of the way it functions. Here is a brief description which will help you understand commercial mortgage in a better way.

Understanding commercial mortgage

The working process of a commercial and residential mortgage is same, only difference is that in case of commercial mortgages, the loan is given against the business purposes.

The commercial mortgages are used because the business trades from the commercial property and this property is being held as collateral for investment purposes. Legally the business property remains a belonging of the lender until the loan is completely repaid.

The ventures applicable for commercial mortgage could be factory or warehouse, offices, retail premises, or residential property for investment including the houses, flats or HMOs (Houses in Multiple Occupation).

Types of Commercial Mortgages

There are various types of commercial mortgages and they depend upon the kind of lender you approach. If you go to a reputed lender like newcityfinancial.com, then you will be provided with various commercial mortgage options to choose from. There are broadly two types of commercial mortgages. They are:

1.      Owner Occupied

The trading businesses who are looking to get finances for existing or new business premise are presented with commercial mortgage. The proprietors provide personal guarantees and the security is offered by way of 1st legal charge over business premise. The security of brick and mortar is usually preferred by lender. Most of the owner occupied commercial properties provide enough security to the lenders – the industrial units, offices, pubs, hotels, retail units, restaurants, mixed freeholds, care homes, etc.

2.      Investment

The property investors who are seeking an investment in complex and commercial residential properties can go for commercial mortgages. There are many scenarios in which finances can be provided – prime commercial investment, leisure properties, retail units, industrial units, offices, HMOs (Houses in Multiple Occupation), etc.