A commercial property mortgage is focused solely on the physical premises being funded; bricks and mortar valuation is required to assess the Open Market Value of the property itself. The type of property mortgage is divided by lenders into those that will be used by the borrower, and those that will be tenanted out – the former being the Owner Occupier commercial mortgage and the latter, the Commercial Investment Mortgage.
With this loan, the borrower will need to demonstrate the loan's serviceability from business profits, and therefore business accounts will be required alongside proof of any additional income or secondary security that may be offered.
If the loan is to purchase a commercial property on an investment basis, then the affordability will be based on the property's rental income as verified by an independent surveyor as typically lenders will not lend on vacant commercial property.
Commercial mortgages are typically taken on by businesses instead of individual borrowers. The borrower may be a partnership, incorporated business, or limited company, so assessing the business's creditworthiness can be more complicated than with residential mortgages.
Commercial mortgages are similar to residential mortgages, except the collateral is security over the Freehold or long Leasehold of a commercial building or other business real estate – in general, not a single residential property, although residential property portfolios are common.
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