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| Home » Mortgage Overview » Commercial Mortgage |
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Commercial Mortgage |
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A Commercial Mortgage is similar to a residential mortgage, except the collateral is a commercial building or other business real estate, not residential. Commercial Mortgage is secured by commercial real estate, usually with a twenty to forty year term. Commercial Mortgage differ in many ways from residential mortgage loans. These are highly customized financings and are usually attached to a Base Rate such as the bank Prime Rate and are sometimes made at fixed rates. Rates and payment terms
are negotiated in each loan by the borrower and the lender. Commercial Mortgage have commitment fees and can be quite profitable for mortgage lenders, although there is some risk involved it. The finance is frequently arranged through multi lender Loan Participations of some lead banks. In these mortgages, in the event of default in repayment, the creditor can only seize the collateral, but has no further claim against the borrower for any remaining deficiency.
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The majority of Commercial Mortgage in the United States, requires the borrower to simply make a monthly payment small enough to pay off the loan over a twenty to thirty year time frame. Thus there are two elements generally to the term of a Commercial Mortgage loan , the length of time is allowed until balloon payment and the amortization. The length of the loan can vary from five to thirty years. The common applications of these loans include acquiring land or commercial properties, expanding existing facilities or refinancing existing debt.
To facilitate these loans, many times lenders require the property to be owned by a single asset entity such as a corporation or owners who have limited personal liability for the debts. Interest rates are usually higher than those for residential mortgages. The most common is a fixed-rate loan, where the interest rate remains constant throughout the term. These are typically based on treasuries, swaps, corporate bonds, or commercial mortgage-backed security rates. Any business owner can fulfill his financial requirements for expanding business activities through Mortgage Overview .
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