Commercial Mortgage Loans

Real estate is used to collateralize and execute commercial mortgage loans. The only difference between nearly similar commercial mortgages and residential mortgages is that, the collateral used to secure the former loan is a commercial (business) building rather than a personal residential home. The lender can seize the collateral (building) to recover the loan proceeds if the borrower defaults on the loan.

Instead of persons, commercial mortgage loans are available to businesses. These businesses must be financially sound can include limited companies, partnerships, incorporated businesses, etc. Verifying the credit worthiness of a particular individual is far easier than the process to verify the business income. This is the reason for the traditional commercial mortgages taking six to nine months to underwrite.

Reasons for obtaining commercial loans are varied. These can be improving or enlarging present premises, buying the premises of an existing business, making residential and commercial investments or developing the current property in other ways. For instance, purchasing previously constructed business premises, shops, offices, pubs or restaurants. Apart form these, commercial mortgage loans can also be taken to buy business assets like specialized machinery and plant equipment.

Residential mortgage loans have lower interest rates than that of commercial mortgages. Again, the interest rates for commercial mortgages are lower than the rates on unsecured business loans. The most common commercial mortgage is a fixed-rate loan. The similarity between this and the fixed rate home mortgage loan is that the interest rate remains the same throughout the term. Though the term for most commercial mortgage loans is between 3 and 10 years, they can nevertheless be extended for as long as 25 years.

A direct correlation exists between the commercial mortgage loan amount and interest rate that you can receive, and the credit worthiness. This credit worthiness has been assessed by the lender in relation to your ability to repay the loan. You will have little trouble getting a commercial mortgage at an attractive interest rate if you have an excellent business record with a profit and loss business statement that can be verified.
Only after extensive examination of your profitability and business stability, are commercial loans provided. Your last three years of audited financial statements are usually wanted by the Lender. These statements should include a balance sheet, profit and loss statement and a cash flow forecast. What is important to both you and the lender is favorable business information. This is because the lender can repossess your property and sell it to repay the outstanding mortgage balance if you default on the loan.

The internet is the best place to find commercial mortgage loans. All the countless commercial lenders who are competing for your business advertise on the Internet. You can determine and choose which is best for your financial situation after a possible comparison of many loan quotes side by side.