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Points to consider while obtaining a commercial property loan

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A commercial property (mortgage) loan is secured by commercial property like apartment, warehouse, land, office or warehouse. There is a huge difference between the requirements of a residential home (mortgage) loan and commercial property (mortgage) loan. Most companies dealing with loans take decisions depending on the type of loan you are going to avail.

Basic requirements

Investment property loans come with a lot of requirements as compared to residential home (mortgage) loan. The appraisals are directed based on the size of the property, location, condition and accessibility. For such loans, you should present a good business and personal financial record. The lenders would ask for more explanation when it comes to income and documentation of related asset after they check your credit history. This is done to check your capacity/asset to pay off the loan amount in case of a non-payment. Some lenders also ask for the profitability proof of your business.

Huge down payment

In some cases, loan lenders ask for huge amount as down payments due to the risk involved. The lender will offer you various options including floating rate, fixed rate and other rate packages. The property must present an appropriate ratio of debt-payment, which is often calculated with the help of Net operating income.

Factors you should consider

  1. you should signify solid income flow
  2. Present a good profile of your management team
  3. Present the blueprints and building plan for the property you are going to use.

In case of a tenant, he/she should be able to present a sound and strong financial strength. The features you should consider in financial statements are consistent collections (monthly), profit, net worth, cash flow (positive) etc., it is always better to purchase a commercial property than actually renting it. Often, mortgage payments turn out to be lower than the rental payments.