What You Know and What You Don’t Know About Commercial Property Loans?

Are you planning to purchase a commercial property? If yes, then it is time to borrow a certain portion of the price through commercial property loans. But, this type of loan is different from residential loans. Let’s see how!

Commercial Property Loans

An Insight into Commercial Property Loan!

Commercial property loan refers to a special type of finance that helps in purchasing commercial properties like:

• Factories
• Retail outlets
• Industrial sites
• Restaurants and many more

The amount borrowed has a rate of interest that you have to pay in addition to the principal amount. The entire amount along with the interest must be paid before the loan term comes to the end. 

The commercial property will serve the most important asset that will help in your business. Hence, it is important to choose the right option among various types of commercial property loans for financing the purchase.

Hidden Purpose Behind a Commercial Property Loan

Before comparing various types of loans by peeping into details, it is vital to consider the purpose of the loan. On that basis, your application will be assessed by the lenders. The most common purposes behind borrowing a commercial property loan include the following:

• Purchasing the property as an investment – If you are planning to invest in a commercial property to lease it to a third party, then you will be considered among low-risk borrowers. Lenders will offer you a simple application process along with favorable rates of interest. 

• Purchasing a commercial property as owner – Purchasing a property for expanding your business will be considered as a high level of risk. Hence, lenders will request you to satisfy certain criteria. The interest rates charged will also be a bit high.

If you want to withdraw the required amount of money from a pre-sanctioned amount of loan, then you need to follow certain procedures. Taking the help of professionals will help a lot in this regard.

What are the Different Types of Commercial Property Loans?

Maximum loans related to commercial properties work in the same manner as home loans. Some of the most common choices in commercial property loans include the following:

• Variable rate
• Fixed rate
• Split rate
• Principal and interest 
• A loan with interest 

Many loan options are inclusive of useful features that include additional repayments with zero fee or offset.

If you are searching for an alternate option, then you may prefer a commercial property loan with credits. This option facilitates funding to a pre-determined limit so that you need to pay interest on the fund that has been drawn. 

Your broker may help you in selecting the right type of commercial property loan that will suit your needs and budget. Also, you will get a crystal clear idea regarding the amount you may afford to borrow along with loan repayments.

What are the Various Types of Lenders?

Once you get a clear idea about the commercial property loan you must apply for, it is the turn to find the right type of lender. Shaking hands with the right lender will fetch sharper rates of interest along with better terms. 

Commercial Property Loans

Below are various types of commercial property loan lenders who can help you as per your requirements:

• Major financial institutions – Major financial institutions like banks offer commercial property loan products that are owned by them. Also, they comprise of limited areas of specialty. People going with a simple investment like an office or warehouse will get sharper rates with the lowest risk of investment.

• Building societies – These are non-major banks that offer commercial lending. Their rates of interest and fees are not always competitive. There are many alternate ways along with flexibilities that make these places best for obtaining commercial property loans.

• Specialty lenders – They are special types of lenders that provide loans to property developers looking for zero pre-sales finance. As this type of lending is inclusive of lots of risks, they may cost more.

• Private lenders – Numerous private lenders provide commercial property loans. It is better to go through their terms and conditions properly before taking any decision. 

Hence, lending loan for commercial property remains no more a hassle. Having a crystal clear idea along with approaching the right type of lender will help.