In order to buy a commercial property usually, business owners take commercial mortgages. This type of loan is secured by a piece of commercial property. Similarly like residential market, mortgages companies always try to compete with each other by offering lower interest rates, reduced processing fees and better terms on their commercial loans. Here are some tips shared by Lloyd Kagin to compare commercial mortgages by considering the details in the term of the loan.
Investigate the interest rates: The very first important step which needs to consider by the borrowers is the interest rate. When a bank lends you money for a specific time then it charges the amount of interest from you. Or you can say it is the “cost” of getting the loan. Higher will be the interest rate more money will be cost to your business in order to pay the interest amount.
Investigate the interest rates: The very first important step which needs to consider by the borrowers is the interest rate. When a bank lends you money for a specific time then it charges the amount of interest from you. Or you can say it is the “cost” of getting the loan. Higher will be the interest rate more money will be cost to your business in order to pay the interest amount.
Compare adjustable and fixed interest rates: There are two types of commercial loan interest rates are offered to most borrowers- variable and fixed. Fixed interest rate is a single interest rate which applies consistently for the entire duration of the loan. It provides certainty and stability as you can calculate the monthly payment and plan accordingly to pay that amount monthly. A variable interest rate varies from month to month. If the rate goes down then you can save money but if it goes up, you may pay more.
Find a repayment schedule: The repayment schedule consider both the duration and “term” of the loan as well as the reimbursement schedule. The term is the duration of time from the date you borrow money. The repayment schedule is the hypothetical length of time that is used to determine your monthly payments.
Find out if you can pay off the loan early without penalty: Banks give you loans in order to make money from the interest amount. If you pay the loan early, it will decrease the interest income of bank. Some bank assigns a penalty for early payoffs. If you think, you can pay loans early then you should talk to the bank for off the loan early without any penalty clause.
Compare the available loan-to-value ratios: LTV is a calculation that compares the amount of the loan to the exact value of the property. A higher LTV provides the lender less security however with low LTV you can often negotiate for better interest rates or repayment terms. Generally, LTV for commercial loans falls in between 65% to 80%.
