What You Should Know About Commercial Mortgages
Getting a commercial mortgage is a great option for growing businesses to meet their need for commercial space as well adding to the capital assets of the company. This is often more advantageous to leasing a commercial space, since rent is merely an expense, but mortgage instalments are basically investments and at the end of the term you end up with the ownership of the property. However, there are a few things that you should know about commercial mortgages to ensure that you fully understand what you are signing up for.
Understanding the fees
Most reputable lenders are quite unambiguous about the costs of their credit services. However, some less reputable or predatory lenders may offer mortgages that may appear to be enticing only on the surface. The advertisements may mention very low interest rates, but may contain other deceptive charges. Sometimes these may be applied in the form of certain. Fees. Some additional benefits, such as fixing interest rate when the rate is at a historic low point, may justify some fee. However, take a look at all the different fees that are chargeable. If you don’t have any specialised personnel to handle these dealings, you can seek a consultation with a broker to understand the agreement. Sometimes the fees for missing instalments can be exorbitant in order to intentionally drive lenders towards bankruptcy and foreclosure so that the lender can sell the foreclosed property for a higher profit. You must be aware of such predatory lending practices.
Increased liability and risk
A mortgage will show up immediately as a massive liability in your accounts. This will inevitably cause an immediate decrease in your net value, which will climb up higher later as you repay the mortgage. However, a rental is not as big of an immediate liability. If your business can handle it, then there are financial benefits to be gained. You must also take into account that the value of the property and the interest rate can increase as well as decrease. This is an additional risk that you have to take when considering a mortgage. A mortgaged property is also much harder to walk away from than a rented one.