July 01, 2014
Commercial loans are for purposes typically other than residential mortgages and is broad in definition. It can cover funding for assets of a commercial nature or funding for business operations rather than the purchase of an actual asset.
Examples of commercial lending might include:
- mortgages for the purchase of factories, shops in business zoning, agricultural land.
- loans leases for commercial and industrial equipment such as trucks, forklifts, work vehicles.
- mortgages over residential property for the purpose of funding business operations or purchases of business and goodwill i.e purchasing a brokerage firm with no physical assets other than existing business operations.
Some residential properties may fall under commercial lending for example multiple unit purchases or developments that are considered to be a commercial enterprise rather than for your own residential purposes - some lenders may have this guide for more than 4 units being built.
Essentially in summary you will find most loans that are not personal in nature i.e. for personal use and not for basic residential investment purposes may fall under the commercial lending banner.
Commercial loans may be more rigid by comparison to typical residential lending such as:
- lower loan to value ratios i.e. 70% lend against a factory vs. 95% lend against a house.
- shorter loan terms i.e. 15 to 25 years for comericial vs. 30 to 40 years for residential.
- typically higher interest rates.
If you have any further questions or would like to apply for a commercial loan please give us a call at the office on 03 9585 7779 and we'd be happy to assist.
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