Applying for a commercial mortgage is different from a regular home mortgage because there is a piece of commercial property involved that acts as a piece of collateral to secure the loan. This property could be an office, warehouse, apartment building, mall, etc. In these types of arrangements, borrowers can often get a lower interest rate because the loan is seen as secure. Commercial mortgages can also come with longer terms and a bigger loan amount because the property is considered a fixed asset, which means it does not depreciate over time as with other items, such as a vehicle.
Preparing for a Commercial Mortgage
If you are considering applying for a commercial mortgage it is important to be properly informed about them. Here are some important things you should know before you apply:
- Be aware of the loan terms
While ‘commercial mortgage’ is a term that refers to loans that involve commercial property as collateral, not all loans have the same details.
- Have a repayment plan
Bank loans have different terms including balloon repayments, which are loans that allow for a large payment at the end of the terms. Unfortunately, these types of mortgages can interfere with a borrower’s ability to pay back or refinance the loan further down the line.
- Know your credit score
It is important to know how a lender might see you in terms of risk. However, it is important to note that not all commercial mortgages are granted based on your credit score. Some lenders make a decision based on several other financial details you provide.
- Know how much you can borrow
Being aware of your financial situation, including your income, expenses, and credit score will give you an idea of how much you can afford to borrow. When calculating the numbers, don’t forget to include interest payments.
- Consider the relationship
Consider the relationship, not just the numbers. Once you have received the loan you will want to ensure that you are on good terms with your lender in case you need to make changes or adjustments to your commercial mortgage in the future. It is important to make this one of your considerations when deciding on a lender. You should pick one who has a good reputation, is experienced, trustworthy, and reliable.
Before applying for a commercial mortgage, borrowers should prepare themselves, especially before they decide on a mortgage lender. While it can seem that having a commercial property as collateral will help secure the best loan terms, being equipped by knowing how much you can afford to borrow, being aware of your credit score, and researching lenders terms is the best way to ensure you find a commercial mortgage that fits your needs. For more information about commercial mortgages or to book an appointment, Northwood Mortgage™ at 888-495-4825 or contact us here.