A commercial mortgage is a loan issued with commercial real estate (not residential) as collateral. A borrower is usually a company or business rather than an individual, and the business may be a partnership, limited liability company, or corporation. As a result, it is more difficult to assess your credit history with this type of mortgage. Because of the increased risk, you might expect commercial mortgage rates to be much higher than residential real estate rates.
A commercial mortgage is for the purchase (or refinancing) of land or real estate for commercial purposes. Similar to a traditional, residential mortgage, money is borrowed and secured against a property.
The commercial mortgage market represents a smaller market share than residential mortgages – although their overall value is disproportionately high. Unlike a residential mortgage, a commercial mortgage extends finance in four distinct ways:
There are a number of properties that can be classified as commercial properties. It is important to identify exactly what type of property you are looking to finance. Residential real estate can be financed under a commercial mortgage if it is purchased as an investment property.
This can fall into one of three categories:
There are a number of other properties that fall under a commercial mortgage. You would consider a commercial mortgage if you are looking to finance an office, retail or industrial property.
For commercial mortgages, it can be difficult to compare rates as lending criteria are not typically advertised and terms and conditions can differ greatly. It is advisable to procure the services of a mortgage broker. A commercial mortgage broker usually deals with office, industrial, retail and rental apartment properties and can generally connect you to a number of lenders in the required area.
Lenders assess the risks associated with individual assets.
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