A commercial mortgage, or a business mortgage, is a loan that is not part of a residence. These mortgages are for people who borrow money to buy land or property for a business. Like residential mortgages, these commercial ones are borrowed from a lender or bank and are repaid in monthly payments, including interest.
Commercial mortgages are used to buy property or land for business; these loans can also develop a new or existing space. Commercial property may include office buildings, apartment complexes, shopping centers, industrial warehouses, or commercial buildings.
Here at LeSolace, we are available to ensure the best option for your investments. It is best to consult with professionals to find out the best choice for your specific situation. Our team works hard, so you don’t have to. We take over the mortgage stress so you can focus on all the other businesses!
A commercial mortgage is a rate the bank charges its clients for both short- and long-term credit. Interest rates on these loans are tax-deductible, and when your property value increases, so can your capital. Renting out the property allows for extra income too.
Traditional commercial mortgages loans are usually up to 85% of loan-to-value (LTV). Established businesses with two years under their belt that have excellent credit are the perfect candidates. The mortgage term can last from three to 30 years.
In general, appraisals can take a lot longer for commercial properties than residential ones. In addition, they also cost more.
Not all commercial mortgage loans are the same; the requirements and criteria are often different. The requirements, such as the minimum required credit score, years in business, the available amount for a loan, and terms can differ.
To apply for a commercial mortgage, here are some of the needed documentation.
- your personal and business tax returns
- financial records of your business
- checking and savings account bank personal and business statements
- asset and liability statements
How Loan Rates Are Determined
There are many questions to ask when figuring out a loan. Is it a fixed interest rate or a variable? Is it fully amortized? With fully amortized loans, the amount going toward principal starts at a low percentage and gradually grows month by month.
Many outside factors determine the loan rate. Here are the top ones.
- Current economic conditions are a significant force when talking about mortgage rates.
- Credit scores play an essential role in mortgage rates. The lowest rates go to those with a credit score of 740 or higher.
- When inflation rises, so do interest rates!
Options for Getting a Commercial Mortgage
Options for Getting a Commercial Mortgage
1. Mixed-use properties
A mixed-use property has both a residential and commercial space in one. Use a semi-commercial mortgage to buy a mixed-use property. One example would be office space on the ground floor with apartments on the second floor. Tenants refer to this type of space as a live-work space.
The combinations for mixed-use properties are endless. Maybe you want to invest in retail stores with businesses located in the same area. Or perhaps you want to rent out both retail spaces, and on top, you want to rent out apartment units. A diversity of tenants creates a more exciting community and increases its value.
These types of properties are often less risky since they are usually in high demand. Higher demand always translates into higher rents. Diversifying your income is always a win!
2. Mortgages for Holding Companies
Due to their financial strength, holding companies can usually get loans at a low-interest rate. When purchasing a commercial property, limited liability protection is available when corporated. Although there is a cost of incorporation, the security of your personal assets can be well worth it.
3. Real Estate investors
A commercial mortgage is a way to go for those looking to purchase a small commercial building to provide rental income. A rental property with five or more units, office buildings, and retail spaces are options in this area. Undoubtedly, finding the perfect opportunity for you depends on how much you want to spend, how much risk you want to take, and how much time you want to put into the investment. Clearly, there is something for everyone.
Thank you very much for your help with the mortgage. We appreciate the quick responses at all times. You provided us with the best rates possible, and walked us through each stage of the process.
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