What Is A Commercial Mortgage ?
A commercial mortgage is a mortgage loan that is used to purchase, refinance, develop or redevelop either land or almost any type of non-residential or business property. This type of loan is secured either by commercial property or by land. A commercial mortgage can also give you the opportunity to release equity from an existing property or land that you own.
Who Does The Borrowing?
A commercial mortgage is sought by a business rather than an individual.
Who Does The Lending?
Banks as well as other loan institutions do the lending.
What Types Of Commercial Mortgages Are There?
- Fixed-Rate Amortized Mortgages: To amortize a loan means to create a schedule for the purpose of decreasing the balance over a determined period of time with payments that are consistent and of the same amount per payment each month. Though with a fixed-rate amortized mortgage the interest rate remains unchanged throughout the period of payments, your initial payments may require that a higher percentage of the payments will go to the interest while the rest will go to the principal whereas toward the end of the loan, it will be reversed. The advantage to this type of commercial loan is that the borrower can acquire the loan when interest rates are low, however if interest rates drop even further after acquiring the loan, your interest rate and payment will not decrease.
- Variable-Rate Amortized Mortgages: With this type of commercial loan the interest rate is permitted to fluctuate based on a specific market index, making it on the one hand vulnerable to high interest rates and on the other hand advantageous to the borrower when interest rates are low. Though this type of loan does have a cap for the interest rate, the borrower must ensure that he/she can make payments at that interest rate cap.
- Interest Only Mortgages: This type of commercial loan permits only payment of the interest part of the loan for the first number of years of the loan. For startup businesses which have little capital, this type of commercial loan offers a way to begin repaying the loan with very low payments. However, when the initial low monthly payments period is over and the principal amount is added into the monthly payments, the borrower must be sure that he/she can afford to pay the now much higher monthly payments.
- Balloon Payment Mortgages: This type of commercial loan does not not fully amortize during the course of the loan repayment schedule. This means that there is a large balance to be paid at the end of the loan repayment schedule hence the name balloon payment. This loan may have either a fixed or a floating interest rate.
Commercial Mortgages As Related To Loan Brokering
A loan broker is an intermediary between a borrower and a lender. A commercial mortgage loan broker will save a borrower a good deal of time by analyzing the different types of information and documents that are required to be submitted to potential lenders. The commercial mortgage loan broker will gather data and summarize the paperwork that is necessary to apply for a loan to mortgage loan companies. With our high-income loan broker program, you can get started as a loan broker in about 10 days.
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