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Are Commercial Mortgage Loans Easy To Get?
If you have a business that operates out of an office or a shop, you would know how expensive paying rent and the associated outgoings can be.
Have you ever considered purchasing the office you work from now or another office? Is it your dream to own your own space so that you no longer have to pay rent and make your landlord rich?
If you answered yes, then you will need to consider a mortgages loan. There are many commercial mortgage loans on the market – but do you know about them and which would be right for you? There are substantial and important differences between commercial mortgage loans and real estate loans.
What are Commercial Mortgage Loans?
Commercial mortgage loans are not the same as real estate loans. Real estate loans are for private purposes and commercial mortgage loans are for purchasing retail or office space.
Commercial mortgage loans are offered under different conditions than regular mortgages loan. They are specifically targeted to be sold to companies with an LLC formation under incorporation. Commercial mortgage loans are used to buy commercial properties.
Are Commercial Mortgage Loans Easy to Get?
Commercial mortgage loans have become more difficult to get since the US sub-prime disaster. Real estate loans were much easier to get a couple of years ago, even if you had no deposit or a bad credit history. It became common place to offer real estate loans to almost anyone, resulting in the collapse of many financial institutions.
Since so many banks have gone under recently, commercial mortgage loans have become more difficult to get. This is not a bad thing – when the loans were easier to get, people were having more problems paying them off. Now banks are making sure that the people they loan the money to can repay it. This is a positive outcome – everyone wants to be able to repay their mortgage, whether it's a commercial mortgages loan or a real estate loans.
Before you consider commercial mortgage loans you should sit down with your accountant and look at all of the incomings and outgoings for your business. What kind of profit are you showing? What are your projections for the next 12 months to 5 years? How much are you spending on rent right now? How much could you afford to spend on a mortgages loan?
Your accountant will help you to figure out what your limit should be when you are looking at prices for your commercial property. Make sure you stay within the limits your accountant gives you. If you do not, you may find yourself in the same position that so many other companies have with the sub-prime crisis – being stuck with a mortgage that you can no longer afford to pay.
What are my other Options?
If you are not approved for a mortgages loan with your bank, what are your other options?
These days many people are looking to offer vendor finance. This is when the owner of the property takes the place of a bank. You give them a deposit and pay them rent each month. This rent functions as a mortgage payment and within an agreed period of time you own the property.
The advantages to this are that you do not have to be approved in a traditional fashion. This means that if you are self-employed or have a bad credit rating you can still purchase the property.
Vendor finance does not have the normal security associated with banks, so you should discuss this thoroughly with your attorney and have a very good contract before you sign on the dotted line.
