Understanding commercial mortgages
A commercial mortgage refers to any loan you take on a property that is not you primary place of residence. Although the term is mostly used to refer to property meant for business purposes, it also includes other types of property acquisitions such as when you take a mortgage on a property you intend to let.
In most cases, the security offered on commercial mortgages is the title of the property being bought. Many lenders will finance the loan up to 70% and you will have to raise the rest of the balance either though some other forms of financing or cash. If you do not have the 30% some lenders will give it to you as long as you provide additional capital.
At EuroGuide commercial mortgages, we offer you loan brokerage services for mortgages, secured loan brokerage as well as funding for commercial mortgages. Through our panel of lenders, we are able to get you the best rates for your mortgage. In addition, we offer you expert advice and guidance in relation to all matters regarding mortgages.
The term of commercial mortgages varies anywhere from 3 years to 25 years although there are some short time financing options available. The short term commercial mortgages usually have a repayment period of less than 2 years and are commonly known as bridging finance. These types of loans are made by specialized lenders are used to start a project before the main mortgage is secured.
Advantages of commercial mortgages
-Commercial mortgages allow you to keep the ownership of the property as well as your business as you continue servicing the loan. Other types of financing usually ask for a stake in your business.
-The loans allow you to make huge capital gains since the value of property appreciates over time.
-Compared to other types of loans such as unsecured loans, commercial property loans have lower interest rates hence lower monthly rates because you can pay over an extended period of time.
-Depending on the terms of your mortgage, you can sub-let the property and earn some additional income which you can use as part of the mortgage repayment.
-Commercial premises are not usually subject to the rental fluctuations associated with residential rental properties. This gives you a chance to make more concrete plans for the repayment of the mortgage.
-Commercial mortgage repayments are predictable and allow a business to make better plans for its cash flow.
-The interest payments on commercial loans are tax deductible which allows a reduction on the annual tax overheads that your business has to pay.
Disadvantages of commercial mortgages
-In most cases you have to raise a deposit of 30% of the value of the mortgage. This is a substantial amount of money that can be used to expand your business.
-In case you take up a variable interest mortgage, you may end up paying a lot of money in case the rates increase.
-While you are still making the repayments, you still have to maintain, insure and secure the property.
By coming to EuroGuide, you will get all the information you need about your commercial mortgage. In addition, we will listen to your needs and customize a loan that is perfect for your needs.