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Commercial Loans
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Click here for a list
of Commercial Programs
A commercial mortgage is a loan given
to a borrower on the basis of real estate collateral. Commercial
mortgages sometimes require additional collateral to secure the
loan. This can be in the form of business equipment or inventory,
personal or other properties, heavy machinery, or any asset of significant
value.
The lender receives repayment of the commercial mortgage principal,
along with interest, over the life of the loan. If the borrower
defaults on repayment the lender the right to foreclose and take
possession of the property, which was used for collateral. Unlike
other short-term business loans, the term of a mortgage loan usually
ranges from 5 to 30 years. The lender retains an interest in the
property until the loan has been paid in full.
US commercial mortgage lenders use guidelines similar to those used
for residential loans. It is important for borrowers to engage the
services of a broker. A broker knows what each lender looks for
in an application and sends the application only to those lenders
who are most likely to approve the loan. The applicant pays the
broker’s fee and often receives approval from multiple lenders,
which leaves them in a position to bargain for better terms.
There are two ways to specify how the interest rate will vary over
the life of the loan. A fixed rate commercial mortgage offers a
flat rate of interest for the period of the loan. The alternative
is a variable interest rate, which may follow after a initial period
where the rate is fixed. The lender will state what their policy
is for interest rate adjustments and what these will be based on. |
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