Commercial Mortgages Buyer's Guide

Introduction to Commercial Mortgages.

Is your business looking to purchase commercial property? Commercial mortgage lenders can provide the funding you need.

Banks and other institutions offer a variety of different lending programs and repayment options so you can select the type of commercial mortgage that best fits your business.

Obtaining a commercial mortgage isn’t as easy as getting a home mortgage – it requires a considerable investment, a strong business history, and a large amount of paperwork. First, you must find a building to purchase before you can even apply for a commercial mortgage. Next, you may need to have the property appraised and show proof that the building is environmentally safe. You also must show you can keep up with monthly payments to avoid losing your property.

Benefits of Commercial Mortgages

ages help businesses get the necessary funding to purchase real estate. If your company has good credit, strong financials and a proven business model, you should be able to qualify for commercial mortgages.

Businesses rely on commercial mortgages to buy land to construct a new building, to purchase an existing building or business, or to acquire multi-unit properties so you can rent space to business or individuals. Examples of commercial real estate include:

  • Office buildings
  • Apartment complexes, condominiums (four units or more)
  • Strip malls
  • Retirement homes
  • Warehouses, manufacturing plants
  • Health care facilities
  • Schools, churches
  • Car washes, repair shops
  • Restaurants, hospitality

Purchasing vs. Renting

Commercial mortgages offer several benefits over renting property. One of the most significant benefits is, simply, ownership. Instead of just providing office space for your business, your monthly payments now help build equity. Also, the interest is tax-deductible, which lowers your company’s gross taxable income.

Another advantage to commercial mortgages is that the loan is generally assumable. This means if you decide to sell the property while still carrying the mortgage, a qualified buyer can take over the terms of your existing loan without needing to go through an extensive approval process.

However, there are significant downsides to consider. Buying is a time consuming process. You must provide significant documentation, including all of your business financials from the last three years. This may include income, rent rolls, business plans, and other proprietary information, and takes weeks for the lender to review. Even after you receive the loan, you may still need to provide regular financial updates to the lender to demonstrate your financial stability.

In addition, you have a fixed cost that you now need to cover, regardless of how your business performs. While a landlord may be a bit more flexible about payments, commercial mortgage lenders won’t be.

Finally, as an owner, you’ll have increased responsibility to maintain the property, particularly if you sublet space to other businesses. Also, if you’re depending on rental income to make payments, you’ll have to work diligently to find tenants as units that stay empty for too long can lead to serious financial problems.