Advantages And Disadvantages Of A Commercial Mortgage

Commercial mortgages are one of the best ways to finance purchases of land and buildings for business purposes. It is a very flexible and affordable thing for most people to do. Commercial mortgages were specially created for those with businesses in mind. Commercial mortgages are normally used to purchase new buildings, buying land to put businesses on, or buying existing businesses.

One of the most important things to note is that the mortgage lender has the legal right to claim the property if the mortgage does not get repaid in full. The property effectively belongs to them until the mortgage loan is fully repaid.

What are the main advantages and disadvantages?

Interest rate options are the same with mortgages for private housing. With fixed rate commercial mortgage deals, there will be a set amount that will have to be repaid each month, rather than a fluctuating amount with variable rates. Fixed rate deals can seem better, as borrowers will know they have a set amount to repay. However, variable rates can actually fall below fixed rates and work out cheaper. They can also work out more expensive, if base rates increase.

The commercial mortgage interest repayments are tax-deductible. Any type of mortgage gives borrowers access to capital they would not normally have access to.

The main disadvantage to commercial mortgages is that the lender has the right to foreclosure, meaning you could lose the property if mortgage repayments are defaulted. A default on a mortgage can be classes as a range of events including not making a payment on time, breaching the contract and insolvency.

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