Are you planning to open a new business venture or thinking to buy some commercial property for rental benefits? In either case, you will need huge investment in terms of finance to own a commercial property and this is where you will need to opt for commercial property loan option.
Investing in a residential property is common but investing in some commercial property seems daunting if you are doing it for first time. However, the overall process of applying for commercial property loan is same as that of residential property loan.
When you go to a commercial lender for applying loan, he will consider following aspects:
- You need to check the overall loan amount and the duration within which you can repay the loan. You need to give some amount of money as deposit and show any equity, if available.
- Lender will also take into account what type of commercial property are you going to own, whether it is a shop, warehouse, office and also where it is located.
- He will entail all the terms and conditions of the commercial property loan.
Basic tips you need to know while applying for Commercial Property Loan
Below mentioned are few basic tips that you must follow in order to crack a good deal in commercial property loan:
- Look for a specialized lender – Many people are not aware of the fact that there are some specialized commercial lenders other than banks who can provide you better deals on commercial loans. Usually, buyers tend to go towards bank for applying commercial loan and banks sell them their famous lending products. But if you know a good mortgage broker who specializes in commercial lending, then he can provide you better options in commercial loan with almost same interest rates as of residential property loans. You can apply for a single or a dual form of commercial loan and arrange for the collateral accordingly.
- Commercial loans come with larger deposits – While applying for residential property loan you can get 90% of the property value from loan. But this doesn’t happen in case of commercial loans; here you get 70% of the property value from loan amount. This simply means that you need to pay high amount of upfront deposit or use more available equity assets.
- You get smaller loan tenure – When you apply for residential loans, you normally get loan tenure of 30 years. But in case of commercial loans, the loan tenure is restricted to 15 to 20 years. This means that buyers would have to repay the loan in shorter time frame which means paying large installments in less time period. Therefore, you need to show strong income proof in terms of pay slips, rental income and lease agreements that signify your capability to pay back the loan amount in stipulated time frame.
- More valuation fees – While applying for any type of loan, a lender needs to order property valuation. In case of residential property loans, these valuations are done for free, but in case of commercial property loan the lender charges fees for property valuation and this fee needs to be paid upfront by the buyer. This valuation fees of commercial loan is comparatively high than that of residential valuation fees. And if property value is higher than $1 million, then automatically valuation fees will rise accordingly. You can request a call from the commercial loan lenders accordingly. Some offer attractive interest rates whereas others provide easy and hassle-free documentation.
So, these were few basic tips that you must be aware of while applying for commercial property loan. These are practical and effective tips that will help you prevent any mistake or error during the loan application process.
