Think Property First For Commercial Real Estate Mortgage
Unlike residential real estate mortgage loan which is given after assessing your debt-to-income formula, commercial real estate mortgage lenders judge your capacity to repay through a formula for debt coverage service ratio. This means you are expected to know the Return on Investment (ROI) that the commercial property you want to refinance or purchase will bring you. Sometimes understanding the difference between commercial and residential mortgage loan can be a headache. Thankfully, you can turn to newcityfinancial.com to learn more about this or know if you qualify for a commercial real estate mortgage loan.
The Role of Property in Commercial Real Estate Mortgage Lending
The value of your property and its future ROI will be mainly determined by the cash flow generated by the assets. The cash flow, therefore, is a key factor in determining the type of loan and the amount that you can be given. Other factors that lenders place under consideration to determine the loan you qualify for include; the general economic outlook of the local market, geographical location of the assets, overall condition of the assets, type of property, your financial strength, personal credit history, net worth of business.
Is Real Estate Mortgage Right For You?
Commercial real estate loan lenders often give lower rates for this loan compared to that of other loans. This is because this loan is mostly given together with a personal property as security. Owner-occupied properties that you could finance by commercial real estate mortgage include office buildings, retail centers, and mixed-use buildings among other properties of this type.
For a property to qualify for commercial real estate funding, a business must occupy not less than 51% of the assets. So the first step to refinancing or purchasing a commercial property should be to determine the exact use of the assets. Know your financial goals and how the assets will be used in improving your cash flow.
The second step after establishing the use and market need for the assets you want to acquire is to analyze the probability of future cash and current flow contribution that it will make to your ROI. To get the whole perspective, you must ask yourself questions such as; will you just be an investor or also a tenant/owner? For how long will you hold the assets?