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The underlying structure of the Commercial Mortgage Financing
Apart from the personal guarantee, is that the property is held as security for the repayment of the loan. But precisely this fact makes it possible for the Commercial Loans to have interest rates less costly than other types of loans with lower a classification of collateral. The importance of the investment also means that the term is longer that Short-term Commercial Loans which makes for easier payment.
In order for you to obtain a realistic estimate of the amount you will be paying for your Commercial Mortgage, you will need to take care of a few things. The first one is the valuation of the subject property. An accurate appraisal of the property will inform you of the actual price of the property in the market and will allow any buyer to get a real price.
The valuation of the property makes you more reliable to the eyes of your financial institution. You will need to hire a third appraisal company to do it for you. The value you pay for these services will come out of your pocket, whether the Commercial Mortgage Loan is given to you or not.
Your income is also another criterion for the financial institution will be used to determine the total amount of your financing. Generally, they may stipulate that the payments are made in monthly installments that are not over than 30% of the net income the company on a monthly basis. This debt-servicing ratio will vary from lender to lender but it is a basis for the assurance for both the lender and you so that your company will be able to afford the payment each month without undue hardship, and your financial institution avoids follow-up costs.
Once you find out what the real value of your property is, and if your income fits the criteria established by the financial institution, your Commercial Mortgage Loan would generally be up to 70% or 80% of the appraised value. Again, this will vary from lender to lender based on lenders’ preferences for risk.
It is suggested that you talk with both Traditional and Non-Traditional Commercial Lenders to determine the amount of your Commercial Mortgage Loan to find the program and payment that fits best with your companies budget.