Understanding the process involved in obtaining a commercial mortgage loan and the requirements to qualify for the loan are important for a business owner. It can make what once seemed like a very intimidating process less complicated.
When you are considering a commercial mortgage, you need to first decide if you want to get a nonrecourse loan or a recourse loan. The difference is that with a nonrecourse loan the lender can only take back the property in the event of a default but with a recourse loan the lender can require you to pay additional money if the property value is no longer enough to cover the loan balance. Getting a nonrecourse loan offers you, the borrower, additional security that in the event of a default on your loan, you will not be forced to pay additional money that you might not have. It protects your personal assets such as your home, retirement account and other investments that you might have.
Next you will want to consider which type of terms you would favor for your loan. A fixed rate mortgage is very popular because the rate is set and you do not need to worry about future budgetary surprises. Adjustable rate or variable rate mortgages sometimes offer a better interest rate but you are risking a rate increase which could be very unexpected. This can make it difficult to budget for the future and can cause you added financial stress when the interest rate increases.
The final type of mortgage term is called a balloon mortgage. This is more unique than the first two types in its repayment schedule. With this mortgage you only pay the interest each month but no principle. You can pay extra towards the principle but it is not required. But at the end of the loan term you are required to make a single payment, the balloon payment, for the remaining balance of the loan. This can leave you with a huge payment due at the end of your loan. Most borrowers are forced to refinance their mortgage balance when the term is completed to make the balloon payment. But the benefit is that you have enjoyed very low payments throughout the term of the loan.
Getting Your Loan
Finding a commercial mortgage loan can take some time but there are many lenders that you can work with. It is important to shop around for the best rates and terms to meet your current and future needs as a business. So invest the time to find the best lender for you.
Make a Great First Impression
When you are applying for the loan remember that the lender is judging your businesses ability to repay the loan as well as to be successful in your field of business. Taking the time to have your business and personal financial information prepared is critical. This will show the lender that you are very professional, that you are taking the loan process very seriously and that you are prepared both for the application process but also the process of repaying the loan. Making a great first impression will be very beneficial for a successful loan application process.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.