A commercial mortgage is pretty much the same as a residential mortgage. In commercial mortgages, one uses a commercial property instead of a residential one. It is mostly businesses that take out a commercial mortgage. What to look for in a second commercial mortgage is important and one should always do due diligence when embarking on a loan of this nature.
A second commercial mortgage is a loan that is secured against the commercial property in question. The equity in the property is one of the main criteria that determine how much money can be loaned against the property.
The lenders are far more exposed with a second commercial loan and for this reason the interest, rates are significantly higher. The second loan is not as significant as the first one in terms of defaulting.
Companies often want to take on new projects, or to open a branch elsewhere and these can be two reasons for taking out this kind of loan. Strain due to debt and high interest rates can be the reason why companies decide to consolidate the debt and have one loan to pay all of this debt off.
The owner many wish to purchase a new house and he could take out a second mortgage on his business to pay the deposit on his new home. Other reasons could include wanting to make home improvements on your house, this will significantly improve the value of your home and instantly increase the value of your investment.
Equity must exist in the commercial property before a loan can be granted. Equity exists when what you owe on the property is significantly less than the amount for which the property can be sold. The amount that can be borrowed is based largely on this amount.
Payment of this loan is not dissimilar to that of a residential home loan, there are however, differences and certain disadvantages and advantages that need consideration.
Your property is used as security for the loan. This is the biggest disadvantage of second mortgages. In the event of defaults, your property may be sold to pay the debt off. Due to this, it is advisable that you have a debt solution strategy in place that will prevent you from falling back into very high interest debt when you take a second mortgage for purposes of debt consolidation.
Due to the fact that the processing fees are very high with these kinds of transactions, one should not use this facility in order to obtain low amount of money.
Second mortgage loans can be from the original lender or can be from another lending institution. By shopping around and moving to another lending institution you may be able to get lower interest rates and a longer term to pay back the money. Working with the original lender does save time as they have all the relevant details and the bond details.
If you are considering going the route of a second commercial mortgage then make sure you know what to look for in a second commercial mortgage, this will ensure you have all the facts at hand and that you understand what you are letting yourself in for.
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Topics: Mortgages | Comments Off
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O'Leary, Terry "Ultimate Inside Info On Precisely What To Look For In A Second Commercial Mortgage." Ultimate Inside Info On Precisely What To Look For In A Second Commercial Mortgage. 25 Jun. 2010. uberarticles.com. 25 Oct 2014 <http://uberarticles.com/finance/mortgages/ultimate-inside-info-on-precisely-what-to-look-for-in-a-second-commercial-mortgage/>.
APA Style Citation:
O'Leary, T (2010, June 25). Ultimate Inside Info On Precisely What To Look For In A Second Commercial Mortgage. Retrieved October 25, 2014, from http://uberarticles.com/finance/mortgages/ultimate-inside-info-on-precisely-what-to-look-for-in-a-second-commercial-mortgage/
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O'Leary, Terry "Ultimate Inside Info On Precisely What To Look For In A Second Commercial Mortgage" uberarticles.com. http://uberarticles.com/finance/mortgages/ultimate-inside-info-on-precisely-what-to-look-for-in-a-second-commercial-mortgage/
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