Commercial mortgages – Know what is in store for you

You can secure a mortgage for buying a house where you would be living, in other words you will make that your primary residence. This kind of a mortgage is called a home mortgage. There is also another kind of mortgage known as commercial mortgage.  Such a mortgage can be used for the purposes of buying premises for business, extending existing business premises, developing property and making residential and commercial investments. For a commercial mortgage, the repayment period ranges typically from 10 years to a maximum of 30 years. There are also some lenders who will offer you commercial mortgages that have very short repayment period such as only 2 years. Some of them allow you to make interest-only payments for the first few years while some of them allow you to make deferrals on up to 2 payments per year. Irrespective of the plan that the lender offers, there are some positive advantages that commercial mortgages have over renting properties and lands.

Read on to know both the advantages and disadvantages so that you can make an informed decision. What are the advantages of commercial mortgages? The advantages of commercial mortgages are as follows: You will be able to retain the ownership of your business and your business premises. There are some investment options where you would be required to give up a fraction of your business ownership.

Commercial mortgages don’t face the rental fluctuations that residential properties do, hence providing a stable environment for business planning. This is a commendable way to realize capital growth over a long period thereby helping you to make substantial capital gain.

You face lower monthly costs as these have lower interest rate compared to other unsecured loans. Also these can have fixed rates which will help you in managing and forecasting your finances more accurately.

The interest payments on commercial mortgages are tax deductible. Hence your overall business tax payment gets reduced.

You will have improved cash flow management and commercial mortgages have payment plans that usually extend over a number of years. Thus you can focus on the profit and loss of your business and the cash flow matters. What are the disadvantages of commercial mortgage? The disadvantages of commercial mortgage are: You need to make a considerable amount of deposit. This is the amount of money you can use in other business operations.

If you own the premises, it would be difficult for you to move your business. When you have a rental property you will be able to negotiate to end your rent agreement or find another business that can take up your tenancy.

If you have an adjustable rate mortgage, then you will be vulnerable to the interest rate fluctuations that take place.

You will be responsible for the maintenance, security and insurance of the property.

If the value of the property depreciates, you will lose capital.

Thus you can see the advantages and disadvantages of taking out a commercial mortgage. Contact the Tom West Company for more on commercial real estate in Dothan.

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