COMMERCIAL MORTGAGE LOANS: DIFFICULTIES AND SOLUTIONS

2007-04-17 04:46:40

( Financial )



Commercial mortgage loans are secured loans guaranteed by real estate properties. These are loans usually availed by businesses or individuals to generate income. Hence, it is also called income property loans or commercial real estate financing.

Scenarios Illustrating Difficulty in Accessing Commercial Mortgage Loans

Borrowers encounter difficulties in accessing commercial mortgage loans in various situations. Borrowers whose income is not fixed, erratic and difficult to document will have difficulty accessing commercial mortgage loans. Self-employed borrowers or individuals earning on commission or incentives usually have difficulty providing traditional banks with their income tax returns that are basic requirement for commercial mortgage loans.

Absence of long-term financing for commercial mortgage loans is another scenario that makes it difficult to avail for borrowers with limited income. It will result to borrowers having difficulty in making on time repayments. Banks usually provide commercial mortgage loan for an average term of two to three years which is considered too short by some borrowers who will be subjected to higher amount of repayments.

Commercial borrowers who are into small scale real estate commercial selling need a longer repayment period to be able to roll over their money to generate more income while waiting for their properties to be sold in the market. Also, it will help them grow their business and generate cash flow in the interim.

Solutions for the Difficulties Faced by Commercial Mortgage Loans Borrowers

Borrowers who have erratic income can apply for a stated income loan from commercial lenders. This is a type of loan where borrowers are not subjected to income verification such as the requirement of income tax returns. It will significantly resolve the problem of providing income tax returns since lenders will not even require borrowers to sign a form that gives them the authority to inquire directly from Internal Revenue Services their income tax returns.

Small business owners should look for commercial mortgage loans that have a loan term of fifteen to twenty years. The most favorable term would be twenty five years. Seeking a commercial mortgage loan with this type of loan term might be difficult but it is not impossible. Lenders are willing to provide long term financing for commercial mortgage loans as long as borrowers can sufficiently ensure that they can meet the amount of amortizations. Thus, it is recommended that borrowers should present an excellent credit records as well as proof of their ability to pay off the loan.


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