Are you having trouble expanding your business? Are the rentals too expensive? Don’t worry! We’ve got you covered. Listen to the best commercial mortgage broker in toronto to learn how a commercial mortgage can help you grow your business. We’ll go through an extensive list of commercial mortgage benefits in this article. Find out the full list here.
What is a commercial mortgage?
Like traditional residential mortgages, commercial mortgages are secured by a property. Commercial mortgages, however, are used to finance the purchase of land or properties for commercial purposes. The money can either be used to develop a commercial property or to expand an existing one. Although commercial mortgages have a smaller share of the market, their value is high.
Mortgage financing is usually used to buy commercial properties, expand a buy-to-let portfolio, and develop a business. The lenders get security on their loans, and borrowers pay less in repayments. To put it simply, commercial mortgages benefit both lenders and borrowers. A commercial mortgage is usually a long term loan, and a borrower can borrow almost 70% of the property value.
Benefits of commercial mortgage
A commercial mortgage is a vital source of funding for your business, as it relieves you of the burden of paying high rent. A rising property price enables you to access equity and secure the future of your business. Here are a few benefits of commercial mortgages:
- Expands your trade
- Helps you buy new equipment
- Released fund for growth or investment
- Saves you from high rentals
- Helps you consolidate business debt
- Finally, allows you to lease property to create an additional income
Getting a commercial mortgage: Know these vital points
Various types of lenders offer commercial mortgages. Many lenders offer loans only if the borrower has a lot of assets to mortgage, while others only finance land properties. You must choose a lender that is right for you. The borrower must be prepared with three years’ worth of tax returns, current performance analysis, asset & liability statements, as well as details on your partners and directors. You should be familiar with these essentials when applying for a commercial mortgage.
Mortgage term: The term of a commercial mortgage can range between 5 and 40 years. Since these mortgages are a big responsibility, it’s important to understand your business requirements and what the lender expects.
Repayment: Interest rates of a commercial mortgage are higher than residential mortgages. Depending on the property’s value, you may also have to deposit at least 30%. However, the higher equity makes commercial mortgages lucrative.
Credit history: You must present your business plans and projections to borrow a commercial mortgage. The better your credit history, the better your chances of loan approval.
Stamp duty: You need to pay a land tax for your properties. The rate, however, varies significantly.
Interest rates: Interest rates change depending on the set rate at different times. You also have fixed rates for a time period.
Fees: Commercial mortgages also involve a valuation fee, arrangement fee, legal fee and an administration charge.
Tax: The interest for your commercial loans are tax-deducted.