Best Mortgage

C-Mortgage is a mortgage used to buy a commercial piece of property or commercial building. Basically, it’s similar to residential mortgages, but collateral is business property. Interest rates are usually higher than for residential property, the length of the loan can range from 5 - 30 years, and payments due monthly. A commercial mortgage is probably the best way to finance the purchase of buildings and land for business purposes or to expand existing facilities. It provides the most flexible and affordable finance solution. Commercial mortgages are specialized due to the fact that the lender has a legal claim over the property until the loan has been repaid in full. The most common commercial mortgage is a fixed rate loan, where the interest rate remains constant throughout the term. Loans can also be variable or capped. A second commercial mortgage is an additional loan on a commercial property secured behind that of the first lien.
There are some advantages and disadvantages concerning C-Mortgages.
Advantages:
1) Tax Advantage - Interest payments on your mortgage are tax deductible and are made with pre-tax money.
2) Better Cash Flow - A mortgage gives you access to capital that you would not normally have access to with minimal up-front payments and the flexibility to design a repayment plan that suits your needs.
3) Retain ownership - Instead of raising funds by selling a share in the property or the business to an investor, you retain complete ownership. The lender is only entitled to an interest return on its mortgage, not a percentage of ownership that an investor would expect. Also they can only exercise the right if you default on payment. You retain all the benefits of ownership in an asset that has the potential to increase in value.
4) Simplified Cash flow management - Mortgage schedules are pre-set, making cash management more predictable.
Disadvantages:
1) Collateral - The nature of a mortgage requires you to pledge the purchased property to the lender. If you default on the mortgage, the lender is able to foreclose the property and sell it to repay the outstanding money owed to the lender. Make sure when the mortgage is repaid; the lender is obligated to release the mortgage and is required to make available any government files acknowledging this release.
2) Defaults - The lender may define a variety of events that will constitute a default on the mortgage, including failure to make any payment on time, bankruptcy, insolvency and breaches of any obligations in the mortgage agreement. Try to negotiate an advanced written notice of any alleged default, with a reasonable amount of time to cure the default.
A commercial loan can either be set up as either secured or unsecured where a commercial mortgage will be secured against the property. Some business loans may also require personal guarantees which could involve the borrower’s house forming part of the security for the loan as well as the business itself.
Interest rates vary widely (usually between 1% and 7% over base rate) and usually a secured loan will be cheaper than an unsecured loan. Lenders do not often advertise set rates for business loans but will negotiate a deal specific for each case. The lender usually looks at monthly cash flow projections, personal financial statements covering at least the last 3 years, a detailed business plan, tax returns, company balance sheets and profit and loss accounts, a management profile and details outlining how the loan will be used. This is not always the case however and there are some reputable lenders willing to look at a case with adverse credit history, either personal or business. A business loan is likely to be a cheaper option for a company with overdraft facility and sometimes even if there are funds available, there may be tax advantages against interest payments when borrowing money rather than dipping into company funds.
Another commercial mortgage option is flexible commercial mortgage. It may be suitable if you want to do something different with your small business premises. You can buy a new building or release cash locked up in your existing one. For example, Barclays Bank offers flexible commercial mortgages and outlines the following benefits of this option:
1) You get quick access to funds
2) A commercial mortgage is flexible – you can use it for a range of purposes, from purchasing the premises to releasing the equity locked in your property for business uses
3) You can free up your cash flow by taking advantage of an initial repayment holiday of up to 24 months
4) You can cover against death and/or critical illness
Barclays also gives the main C-mortgage features:
1) Any repayment period from one to 25 years
2) Up to 80% of the valuation or property purchase price
3) Optional repayment holiday up to 24 months at the beginning of mortgage period (interest rate will be debited to the current account)
4) Choice of fixed or variable interest rates, with the option to change during the mortgage term
And in conclusion, terms and conditions to follow: The maximum amount of loan is 80% of the market value of the property, and is subject to normal credit checks. There are some limitations for certain industries. You must own and occupy the property that you are offering as security. A legal charge over your property will be required.

This entry was posted on Wednesday, August 16th, 2006 at 7:22 am and is filed under Main. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.