Commercial mortgages are different from personal mortgages in several ways. First of all, commercial real estate loans are secured by the first legal charge on a property, which means the interest rate, balloon payment, and term are all different from personal mortgages. Moreover, business mortgages have much shorter terms. So, how do you get a commercial mortgage? Read on to discover the benefits of getting a business mortgage. After all, a business mortgage is a smart choice for your business. 주택담보대출
Business mortgage expenses include interest rate, term, and balloon payment
The interest rate, term, and balloon payment are some of the expenses of business mortgages. Each has a different impact on the total cost of a business mortgage. These three expenses affect the business’s overall financial management, so you need to understand the pros and cons of each before signing a loan contract. Here’s how to calculate each of them. To calculate the balloon payment, you’ll need the amount of the loan and the annual interest rate.
During the initial period, balloon payments are minimal, because the loan is not fully amortized. This process works by decreasing the loan balance over time. In some cases, balloon payments are interest-only. However, for most businesses, balloon payments are a good choice. During this time, you may want to consider making interest-only payments until you are able to make a balloon payment.
Commercial real estate loans are secured by a first legal charge on a property
When applying for a commercial real estate loan, you need to prove that you have the financial means to repay the loan. As with any mortgage loan, you must provide extensive documentation proving your income, debts, and credit profile. You can apply for commercial real estate loans through a commercial lender, who will then review your finances and evaluate your property. In some cases, you can even get creative and use a life insurance policy as collateral.
To obtain a commercial real estate loan, the borrower must occupy at least 51 percent of the building. The property acts as collateral for the loan, and the lender attaches a first legal charge to the property in case the borrower does not repay the loan. In addition, a small business can apply for an investment property loan if it intends to rent the property.
Terms are shorter than personal mortgages
When compared to personal home loans, business mortgages have much shorter terms. A 30-year mortgage is the standard. However, the terms of a business mortgage are much shorter, ranging from two to five years. Most business mortgages also come with early pay penalties. While this might not be an issue for a personal mortgage, many businesses will find this an inconvenience. Here are a few things to keep in mind.
Getting a commercial mortgage
The first step in getting a commercial mortgage is finding the right lender. Commercial mortgage lenders have different criteria for qualifying for loans. You must be able to demonstrate that you can repay the loan if your business fails. The lender will require certain documents from you, such as financial statements and a business plan. It is essential that you prepare well in advance of the application. It will be helpful to meet with a commercial mortgage broker to prepare.
Before you start the application process, it is important to determine if you can comfortably afford to make the monthly payments. A commercial mortgage is often a great option for small business owners who need new office space or warehouse space, and may want to open a retail location. A commercial mortgage can be used for these purposes, too, by professional landlords who want to purchase property to rent out. You can then use your rental income to pay off the mortgage.