Find the Best Commercial Mortgage Out of Different Options

by Rate Shop Rate Shop

Companies or businesses generally get a commercial mortgage when they are looking to purchase or build a new commercial property or expand the already existing commercial property. The apartment complex, hotel, industrial warehouse, office building, or shopping center is used as collateral. Finding the best commercial mortgage for you can provide you with long-term funding.

With a commercial mortgage, you will be able to build a new commercial property, expand an existing property or consolidate business debt as per your requirement. If you happen to find a low-interest commercial mortgage, you should consider getting it – low-interest secured debt is very valuable to have. It is noteworthy that the interest rates on a commercial mortgage are higher than the residential mortgages.

Once you have made the decision which property you want to finance and secure fund, it is important that you now decide the best commercial mortgage type for your requirements out of the following.

Fixed-Rate Amortized Commercial Mortgages
This is the type of commercial mortgage where the interest rate and monthly payments remain the same throughout the term. So, if you are looking forward to locking in low interest rates, this is a great option for you. When you get this type of commercial mortgage loan, most of your monthly payments go towards the interest in the beginning. When you come closer to paying off the loan, the ratio gets reversed and most of the portion goes to the principal.

Variable Rate Amortized Commercial Mortgages
Interest rate keeps fluctuating when you get variable rate commercial mortgages. They are a great option when the interest rates are low and chances are that they might get lower. It means that if the interest rates increase, less of your monthly payment goes to the principal. It also extends the amortization period. There is obviously more inherent risk but it can help you in saving if interest rates go low for a long period.

Interest Only Commercial Mortgages
If you are a business that doesn’t have much available capital and want payments to be as low as possible in the beginning. That is because with this type of loan, you only pay the interest portion of the loan. It also means that no money goes toward the principal loan amount. Practically, you won’t be able to pay off a loan by making interest only payments. After the “interest only” portion of the loan only period has ended, you have to pay repay the principal in full, or get another mortgage.

Commercial Balloon Mortgage
In this type of mortgage, the borrower makes small, regular payments that go towards both the principal and interest. After the amortization period ends, the remainder of the loan is to be paid in a lump sum. With this mortgage, you can also make additional payments during the term of the mortgage. This can reduce the lump sum you need to pay off the loan at the end of the amortization period. Hence, you will be able to pay off the loan quickly.

As all businesses are different, so are their requirements. Based on your business requirements, you can choose the best commercial mortgage loan for you and apply for the same.