COMMERCIAL MORTGAGE LENDING TYPES OF RATES

2007-04-17 04:46:40

( Business )



Commercial mortgage lending is provided for the purchase or construction of real estate properties. Office buildings, apartment complexes, retail outlets and store building facilities are projects financed by commercial mortgage lending. Funding for business expansion that requires real estate construction is the primary reason for availing commercial mortgage lending.

Fixed rate loans and variable rate loans are the two types of commercial mortgage lending. Fixed rate loans offer fixed interest rate for the duration of the loan while variable rate loans offer interest rate that varies according to the prime rate being offered in the market on a daily basis.

Borrowers can negotiate for a fixed interest rate until the loan is amortized to veer away from paying too high interest rates due to fluctuating market rates. Refinancing can be availed whenever interest rates go lower than the fixed rate you are paying your loan.

Borrowers must understand how variable interest rates are determined to be able to get good interest rates for their commercial mortgage loans. The frequency of changes in variable rates must be determined from lenders to know how many times in a month or a week the rates that you will pay will change. Variable rates will not be a problem to borrowers unless the rates are increasing which will be costly. Thus, it is important to update yourself on the interest rates on your loans.

Borrowers can actually pay more for their loans when interest rates are low to help replenish their loan balance at a lower cost. You can also opt for a loan package where interest rates are fixed for a certain period and moves on to a variable rate after some time. It is particularly helpful to borrowers when interest rates are increasing in the market for the period that the interest rate you are paying is locked in a fixed rate.

Commercial mortgage lending actually works like residential mortgage. However, borrowers need to be careful in availing it since commercial lenders usually offer shorter repayment periods for it.


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