Owning a commercial space is a great investment opportunity. You can count it among your business assets and even rent some of the space to bring in some extra revenue. However, a commercial mortgage can be quite different from a residential mortgage.
The process of applying and securing a commercial mortgage often includes assessing the investment, selecting a location and property, finding the right mortgage professionals to help with the purchase, and applying for the mortgage.
There are also several options when seeking a commercial mortgage, including a real estate mortgage, working capital loan, or a line of credit, among others.
Types of Commercial Property Financing
Before you can decide the type of commercial property mortgage that is right for you, you’ll need to understand the various financing options. Here are the most common ways that businesses fund their commercial real estate purchases.
Traditional commercial mortgage.
Similar to when you buy a home, many lenders offer mortgages for commercial property purchases. One thing to keep in mind is the interest rate you’re getting. You’ll also want to be aware of the loan-to-value ratio. This is the percentage of the property’s value that the lender is willing to offer you financing for. It is usually between 75 and 100 percent of the purchase price. However, if your lender does not offer you a mortgage for the full price, you’ll have to make up the difference out of your own pocket. It would also be wise to choose a longer amortization period so that you can keep more money in your business.
Working capital loan.
This type of financing is often short term, usually around 5 years. Essentially, it is designed to help fund business growth. It may come in handy to cover some of the moving costs or if you need to buy equipment for your new space.
Line of credit.
Another short-term solution is a line of credit for your business. This gives you some extra cash to work with if you find yourself in a pinch. It can come in handy for renovations to your commercial property.
Commercial bridge loans.
These are ideal to use while you are working on a long-term financing plan, but have not secured one yet. These types of loans can help you secure a commercial property or do some renovations on the building.
If you are looking for a commercial mortgage, it’s important to know the various financing options available. From short-term loans to traditional real estate mortgages, there are a number of solutions you can use for your commercial property investment.
If you are interested in learning more about commercial mortgages, call Northwood Mortgage™ at 888-492-3690 or contact us here.