Table of Contents:
- What is a commercial mortgage?
- Are you looking for a commercial mortgage?
- Who makes use of a commercial mortgage?
- What documentation do I need for a commercial mortgage?
- Can I get a commercial mortgage if I have bad credit?
- What are the advantages and disadvantages of a commercial mortgage?
- Is a commercial mortgage the best option for my company?
If you’re not sure how a commercial mortgage works or if it’s ideal for your Alberta company, the following information will put you in the know.
What is a commercial mortgage?
A commercial mortgage is a loan that is secured by a property that you do not currently own.
Buy-to-let mortgages are distinct in that they are a higher volume commercial mortgage, offered to a volume market.
Are you looking for a commercial mortgage?
There are no predetermined rates for commercial mortgages, so every application presented to a lending manager is extensively scrutinized as they assess the risk levels.
A commercial mortgage typically has a length of 3 to 25 years; if you require a loan with a shorter term, you may need to consider a “bridging” or “development” loan.
Note: A larger loan with a lesser risk will always get the best interest rate. Lenders will frequently go through a risk profile when processing an application. Your loan will be denied if it falls outside of the catchment area.
Who makes use of a commercial mortgage?
Commercial mortgages are intended for enterprises to buy a property, or to extract value from an existing building which can then be put back into the business.
What documentation do I need for a commercial mortgage?
Profit/loss statements, tax returns, rent roll, pictures of the property, a personal financial statement, and summaries of capital improvements are typical documents required when applying for a commercial mortgage.
Can I get a commercial mortgage if I have bad credit?
Yes, you can get a commercial mortgage if you have bad credit; however, because of your credit score, it will be more challenging to obtain the loan. In some cases, you may need to seek a specialized bad credit commercial mortgage lender.
Because of your bad credit, lenders consider you to be a more considerable risk, which may cause the interest rate to rise on the amount you want to borrow. This is done so that they can recover if you are unable to pay.
What are the advantages and disadvantages of a commercial mortgage?
Advantages of a Commercial Mortgage
- Rent hikes are not possible.
- There is a possibility that you will be able to sublet available space in the building (you will need permission from the lender).
- You have the freedom to add, improve and decorate as you see fit.
- A commercial mortgage’s interest payments are tax-deductible.
- If the value of the building rises, so will your capital.
Disadvantages of a Commercial Mortgage
- You must pay a substantial deposit because you are purchasing a building, which may be better spent elsewhere in your firm.
- Moving shortly thereafter may be more complex, because you will be releasing yourself from the confirmed rental agreement.
- You must maintain your building — if there are any problems, such as upkeep or fixtures, you are responsible for resolving them.
- If your commercial mortgage is variable, you are vulnerable to rising interest rates.
- If the value of the building declines, so will your capital.
Is a commercial mortgage the best option for my company?
If you want to buy your property, a commercial mortgage is the way to go. If you’re going to unlock the value of your current property, a commercial mortgage is also a good option for you and your company.
If you’re looking for a commercial mortgage in Alberta, call Amansad Financial today. We can help you obtain the financing that your business deserves so that you may develop and continue to flourish.