As a business owner in Toronto, one of the most essential decisions you need to make is whether to take out a commercial mortgage to expand your enterprise. The question is, how much mortgage does your business need and can actually afford? Key considerations for taking this important step include examining current and projected income, market conditions, property taxes that arise out of the real estate value and interest rates accrued over time.
Banks and private mortgage companies alike use a mortgage qualifier calculator to determine how much mortgage your business can afford to support. You can also use this tool when considering your options for financing a building extension or acquiring a new commercial space in Toronto.
Learn about the mortgage qualifier calculator here and understand how it works, so you can make the best financial decision for your business:
What a Mortgage Qualifier Calculator Calculates
The first thing you need to know about qualifying for a mortgage is knowing how much you are eligible to borrow. To determine this, certain parameters are taken into account outside of the monthly payment. These include:
1. Loan Amount
Also known as the principal, this refers to the price of the property minus any down payment that you make towards acquiring it. When using a mortgage qualifier calculator, it’s best to remember that the actual loan amount will also include a few charges from the lender, designed to cover the costs of processing your mortgage application.
2. Interest Rate
As mortgages are loans, lenders charge interest to recoup their losses when they finance your property acquisition. The question is, how much interest do you have to pay, on top of paying towards the principal amount?
The key to avoiding shelling out the extra cash for interest payments is finding a private lender that specializes in finding and charging the lowest interest rates in this competitive market. To avoid paying interest that easily fluctuates and skyrockets in a volatile market, a fixed-rate mortgage is a great option to maintain a steady cash flow.
The amortization, or payment schedule, illustrates the amount of each payment and when it has to be made. This calculation includes the principal and interest amounts on the periodic payments made towards the commercial mortgage. The amortization covers the term of the loan, which shows the entire period when the mortgage is active; essentially, it points to the number of years you have to repay the loan.
While it is possible to calculate the amount due for each payment, a mortgage qualifier calculator from your lender in Toronto provides an accurate picture of the entire payment schedule.
Factors that Determine Affordability
With a clear picture of mortgage repayments that need to be made set against the income your business makes, you can determine the affordability of taking on the loan. Additional factors that help to determine how much you can afford to loan include the market value of the commercial property you are looking to mortgage, corresponding property and business taxes in the city of Toronto, and actual income that can be allocated for mortgage repayments with respect to operational expenditures.
Add to that, it’s also important to know how much of the property you own throughout the course of the mortgage. This is known as equity. As you make mortgage repayments, you earn a bit more of the commercial property that you took out a loan for. In the simplest terms, equity can be calculated as the market value of the property minus the outstanding loan balance.
Can You Afford the Loan?
At the end of the day, the important question you need to answer is, can you afford the loan? Taking out a commercial mortgage is a huge financial responsibility. But when used responsibly, a commercial mortgage is a great investment that will provide favourable, unparalleled returns for the growth of your business in the years to come. Using a well-calibrated mortgage qualifier calculator with the help of a professional mortgage broker in Toronto, you can easily determine how you can ensure the growth of your enterprise with a mortgage you can comfortably sustain.
For more information about commercial mortgages and getting the best rates in Canada, call 1-888-495-4825, or contact us here.