The word "mortgage" is typically associated with home loans. And it's certainly possible to receive a loan to assist you in financing commercial properties – but the terms, the process, and many of the other figures governing the loan will be very different than in a traditional home mortgage.
But with careful preparation, investors can handle those differences with ease. Listed below are some of the distinctions that you'd need to be aware of when considering financing for commercial properties, on the Gold Coast or anywhere else. But as with any major investment, further research will be required – and for that, you'd do best to consult with an expert.
First, be prepared for many prerequisites
Because this will be a business investment, there are many financial prerequisites that you'll have to address or demonstrate the validity of in order to receive a commercial loan.
You'll have to demonstrate, for instance, not only your own ability to repay the loan, but also the ability of the property itself to generate income over the given period. This will require a valuation of the property, just for starters, among the many other experts and documents required to make the case.
Borrowing percentages will also be different
Since this is a commercial property, the amount of financing required is sure to be much larger than nearly any home loan. As a result, there are other differences which come into play – most significant among them being that you won't be able to borrow quite as much, percentage-wise (while you may be able to borrow up to 90 per cent or more on a home loan, the ratio for commercial loans is quite different).
Additionally, certain protections, like lender's mortgage insurance, simply don't exist within the realm of commercial lending. Because of that, the lower borrowing ratios, the short loan periods, and other factors, commercial borrowing proves to require a much different method of preparation than the average home loan. While there isn't much margin for error allowed in home loan agreements, there's even less in a commercial loan.
How to learn more about commercial property loans
Because of some of the aforementioned guidelines, like the need to illustrate the profit potential of the property you're hoping to invest in, commercial property loans can vary widely in terms and specifics depending on the building and location itself. For answers to questions about a certain property, investment, or potential loan, contact one of the mortgage brokers at Ray White Surfers Paradise today.