A commercial mortgage may be described as the type of loan that is obtained on properties that are not your own residences. Buy to let advances may be classified as high volume commercial mortgages. Money lenders and bankers remain cautious when advancing loans. They often take the property as security that the borrowers buy. It may be to the tune of seventy percent of the value of the property while a cash deposit for the balance amount of the purchase value may be asked. Those not having sufficient cash with them may offer additional security in the shape of other property that is considered as the equity. It can be a charge over other assets too like the shares or insurance policies.
Mortgage on leasehold properties – Banks and money lenders generally advance the loans on such properties if the lease remaining period is seventy years or more than that failing which you need to provide additional security. The mortgages under the commercial type are generally from three to twenty-five years. Shorter-term advancements may also be available under the bridging loans or the property development advances. Such loans may be from a limited number of days, say from few weeks up to two years or so.
Commercial loans may be available under variable or fixed rates. These rates may not be fixed like personal advances. The banks and money lenders assess the risk level for advancing loans to the borrowers. The latter are asked all details about their properties etc before they are able to get the loans. Smaller borrowers may be asked to pay higher rates while larger loans may be advanced against the best rates. Loans falling beyond the risk profiles may just be turned down by the banks or money lenders that always focus on their own security.
Quantum of the loan – Owner-occupied properties may fetch as much as seventy to seventy-five percent mortgages. Amount of loan may depend upon the rental income through the investment but it may not go beyond sixty-five percent of the purchase value. The amount may go down further if the borrower wishes to buy a business that involves stocks or goodwill etc.
Commercial mortgages involve some sort of arrangement and valuation fees too that must be inquired by the borrowers before signing the contract with the banks or money lenders. Get everything in black and white to avoid future hassles.