Are you an experienced commercial investor? If so, then you may already understand what a commercial mortgage is and how it works. However, if you’re just making your first commercial investment by purchasing a new commercial property then you probably need to learn a little more about it.
Basically, a commercial mortgage loan is one that is taken out on a commercial property and this property is used as collateral. It’s much different from buying a residential property as credit assessments and mortgage rates differ significantly due to the higher level of risk that comes along with commercial real estate investments.
Can you identify if the property you’re financing is classified as a commercial property or if it’s residential real estate? The difference with residential real estate is that it can be financed under a commercial mortgage as long as it’s being purchased as an investment and falls into one of these categories:
Residential (1 to 4 units)
Residential (5+ units)
Mixed Residential Commercial
Office, Retail or Industrial
How Long Do Commercial Mortgages Take?
Commercial mortgages may take awhile, generally anywhere from 60 days up to 365 days (1 year), whereas residential mortgages are much quicker, closing around the 30 to 90 days mark.
Commercial Mortgage Types
Comparing rates on commercial mortgages can prove to be quite difficult and challenging since it’s a little harder to get your hands on lending criteria you may require and terms and conditions can also vary. A mortgage broker is needed when pursuing a commercial mortgage because they can hook you up with various lenders in your required area.
Criteria to Qualify
Commercial mortgages come with a specified criteria that you must meet since a commercial loan is much greater in value, when compared to a home loan. Here’s a quick rundown of what they look at:
Debt service coverage ratio
Current business situation
Type of business
Speak to your broker to learn more about these criterias.
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