An Overview Of Commercial Real Estate Financing

2007-03-08 10:33:40

( Financial )



Commercial real estate financing is used to purchase, refinance or build commercial properties owned by an organization or an individual. Commercial real estate financing can be used for condominiums, commercial business real estate, factories, apartments and warehouses. Restaurants, farms, hotels and shops are other forms of properties that qualify for commercial real estate financing. Commercial real estate financing is also used to renovate or expand a commercial property. The purchase of a piece of commercial property is also possible through commercial real estate financing. This is done in order to have it leased, or so that the property is resold at a higher value.

Commercial real estate financing also known as commercial mortgage loans, are also used to generate the funds needed to capitalize a business. This is done in two ways: converting the equity in your property into cash. Equity is the market value of your property less any money owed against the property. Another way is to apply for a commercial refinance loan. The amount you request for should be higher than your current mortgage loan, so that the difference can be used for funding your business.

Commercial real estate financing is considered as a secured loan with the commercial property being used as a collateral. The property papers are kept with the lender until full loan payment is received. When obtaining commercial real estate financing, the borrower must ensure that the property will produce enough income to assure that monthly payments are made. Failure to do so will result in the property being repossessed by the lender.

The amount of money that a lender approves for commercial real estate financing will depend on the market value of the property. Another deciding factor when approving financing is the ability of the lender to pay.

Interest rates are charged with commercial property loans, which can be either be fixed or variable. Fixed interest rates remain constant throughout the life of the loan, while variable rates change annually.

When availing commercial real estate financing, you should prepare to pay a certain percentage as down payment of the loan. In addition, expect a number of other fees will be charged including broker fees, legal charges and survey fees.


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