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Commercial Mortgages
By admin | December 20, 2007
A commercial mortgage is a loan taken by securing real estate to ensure repayment. The only difference between a commercial mortgage and a residential mortgage is that under a commercial mortgage the real estate that is secured is a commercial building or other real estate property that is used for business. Commercial mortgages are entered into by commercial concerns or businesses and not by individuals. Ascertaining the credit worthiness of a debtor under such kind of a mortgage may be a daunting task since the debtor may be a company or a partnership concern and going into the financial condition may be a slightly tricky proposition. One peculiar characteristic of a commercial mortgage is that they are non-recourse meaning that in case of default the creditor can seize control over the collateral but cannot make any further claims towards the repayment of the debt.
The lender may only advance money on the basis on the debtor’s financial situation and they require the businesses to have a good credit rating. It is also required that the business be profitable and stable because the lender also has to look after his own interests. The terms of the mortgage will depend on the credit rating of the business and the size of the loan.
The interest rates for commercial mortgages are also much higher and generally the rate of interest is stable throughout the period of the mortgage. A second mortgage may also be taken on a commercial property but since it subordinate to the first loan, the rate of interest is much higher so that the creditor can recover his money.
Thus commercial mortgages are not much different from residential mortgages excepting a few details and it provides the option to business concerns to borrow money in a way that is convenient to them.
Topics: Commercial Mortgages |
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