Commercial mortgage financing is used to purchase land or premises for business purposes, including offices, warehouses, shops, restaurants, leisure centres and hotels. They can also be used for mixed-use property, such as a pub with living accommodation. 소액결제현금화
Unlike Residential Mortgages, Commercial Mortgages aren’t provided in standardised ‘pre-set’ products and each application is very different. They generally have higher rates than Residential Mortgages to reflect the risk taken by lenders.
Interest Rates
Commercial mortgages typically require lower loan-to-value ratios than residential loans and the interest payments are tax-deductible. The interest rates associated with a commercial mortgage are typically higher than those of a residential mortgage, but the interest rate changes in response to market conditions.
The rate will vary based on the type of lender and these five factors: property location, loan size, loan-to-value ratio (LTV), debt service coverage ratio (DSCR) and borrower financial strength. Many lenders offer fixed and floating rates and varying terms.
Generally, the industry median commercial mortgage rate falls approximately 3% above the effective federal funds rate. However, rates also vary based on the economic condition and property type (investment or owner-occupied). Commercial loan rates are often tied to an index like treasury yields or prime rate plus a margin. This makes it important to work with a seasoned broker who can match you with the best financing options.
Repayment Term
The repayment term associated with commercial mortgage financing is typically based on an amortization schedule. This means that a large portion of each payment will go toward interest for the first part of the loan, but this ratio shifts to more of a balance as the loan nears its end.
Depending on the type of property, lender requirements and market conditions, the structure of a commercial loan can vary. For example, a permanent commercial mortgage loan may have a term of up to 25 years. This is typical for loans secured by buildings that are already developed and largely leased.
Other types of commercial loans include bridge loans and conduit loans. These are often used to finance commercial real estate that is not yet ready to be occupied. The requirements for these loans can be more stringent than those of permanent commercial mortgages, and they may require a certain credit score, as well as the borrower’s business history.
Down Payment
Depending on the type of commercial property you are looking to buy and your own personal financial situation, you may need to put up a substantial amount as an upfront down payment. This is especially true for commercial mortgage loans from banks and hard money lenders.
This is mainly because these types of loans are not backed by government-sponsored programs and therefore carry more risk for lenders. This is why these financing options typically have higher interest rates than individual (consumer) mortgage loans.
Other factors that influence down payment requirements include the structure of the loan itself, which varies by lender, as well as the borrower’s credit history and business background. For instance, traditional commercial mortgage loans tend to require more stringent qualification standards than government-sponsored options such as CDC/SBA 504 or SBA 7(a) loans. Generally, these types of commercial mortgage loans can be secured by the property being purchased and can have repayment terms up to 20 years.
Refinancing
There are many reasons a business or individual might consider refinancing an existing loan. Refinancing involves replacing one debt obligation with another, often with more favorable borrowing terms. Common goals include obtaining lower interest rates, changing the duration of the loan and paying off high-interest debt like credit card balances.
Commercial mortgage loans are typically used to buy, construct or rehabilitate income-producing property that includes offices, multi-unit rental buildings, medical facilities, warehouses, hotels and vacant land for future development. They may be financed by banks, independent lenders, private investors, insurance companies and the U.S. Small Business Administration through its 504 loan program.
Similar to residential mortgages, commercial real estate loans are typically secured by liens against the property. However, the time it takes to close on a commercial mortgage can be much longer than a residential loan because of the greater number of documents involved and more rigorous underwriting process. Refinancing can also take a significant amount of time.