This type of mortgage loans undersigns assets as security. It is similar to the normal home loan where the lender is in charge of the titles of the asset. The loan mortgage lender may decide to dispose of the asset if you default.
They are integral to the funding of commercial real estate schemes. They represent the debt secured by the current or potential property. Adequate debt incurred as a result of attractive interest rates can increase the yield of the scheme. This will be achieved by reducing the investors’ equity, reducing risk and allowing more cash for investor capital for future schemes launch. It is therefore prudent that you find a financial lender that is favorable to the successful financing of the scheme without imperiling you stake.
Normally this type of refinancing is meant to enable you purchase a place to do business. Amount borrowed can also be used to purchase a commercial place to let. You can also decide to use the borrowed amount in building funds for you business related costs.
The repayment of this loan lies squarely on the shoulders of the trader. The sole borrower runs a risk of losing his personal property in the event of a foreclosure. If the loan was borrowed by partners then the liabilities extend is spread across the members.
In the case of a limited company, the liability lies with the respective business and not the people operating it. This deviates from the liability attached to sole proprietorship businesses and partnerships which place the liability on the owners of the business. The company offering the loan may ask for personal guarantees and surety if the business setup in the profit-making property consists of limited funds.
If the amount borrowed is guaranteed against assets then the guarantee giver runs a risk of losing his property. There are many types of mortgage loans that one may opt for. The own use commercial loan is used by a sole proprietor to finance his own business.
While the commercial investment loans let borrowers put their money to lease or rent. The only catch in this type of financing is that the borrower has to make extensive citations related to the utilization of the leased asset. Before being financed the lending company will assess the credibility of both the company and the business owners.
In the case of a limited liability companies the credit details of the top management and any other relevant governing body will be assessed. To minimize the risk of defaulting, most lenders are interested in the money involved and not the commercial property. A foreclosure is a very expensive exercise that does not benefit either party. This explains the reason why lending companies try to minimize the risks associated with defaulting.
These types of mortgage loans are usually dependent on two key factors. The main factor that will be considered is the prevailing interest rate. Secondly the amount of risk that is perceived to be incurred by the lender will also have to be considered.