Are you planning to apply for commercial property loan? While the process of getting a commercial loan is similar to that of a residential property loan, there are a few things that you should know before making an application.
1# Different Process
While the process to sanction Commercial real estate loans is the same as that of residential property loans, however, there are a few criteria that lenders pay attention to –
- Your capacity to repay
- Deposit made by you and the available equity
- What type of commercial property you are applying a loan for
- Lease details and other conditions
There are several other things that a lender may ask for, depending on their specific needs.
2# Lower Loan-To-Value Ratios
Unlike residential properties where the borrower can borrow up to 90% of the property value. But the commercial property loans usually have a limit of 70% LVR. It also means that you would need a larger deposit. If you want to know how much your monthly payments will be – you can use the Mortgage calculator in St. Gorge.
3# Shorter Tenure
The tenure of a residential loan term is usually 30-years. However, for a commercial property, it is usually 15 to 20 years. It also means that you need to pay a larger deposit and the repayments will be higher as you need to pay higher principal amount in a shorter time period.
4# Lease Terms and Other Conditions Matter Too
The loan amount also depends on the lease tenure and monthly amount paid by the tenants. The commercial leases are longer and vary from 3-5 years. The tenants in the commercial property usually pay for the utilities and other things, which goes in borrower’s favour.
5# Higher Fee
As a borrower, you need to pay a higher valuation fee, that too upfront. When you apply for a commercial property loan, you need to pay this fee and the actual amount that need to be paid depends on the amount of loan.
Prepare For Your Loan Application!
Before make an application, consider various factors, and it’s best to take the help from a finance broker. Consult Your Finance Adviser team for any financing advice. You can also use our Refinancing personal loan calculator and find about your repayment capacity well in advance.
