Commercial Mortgage

A commercial mortgage is similar to a residential mortgage being that real estate is used for collateral to secure repayment.

Commerical mortgages can be made to businesses instead of individual borrowers. The borrower can be a partnership, incorporated business, or limited company, so assessment of the creditworthiness of the business can be more complicated than is tha case with residential mortgages.

Commerical mortgage loans are almost always designed to be underwritten based on entirely on the attributes of the property being mortgaged, as opposed to the credit attributes of the borrower. Commerical lenders require a minimum debt service coverage ratio or net cash flow of the property.

Commercial mortgage process in more indepth then a residential mortgage, as its process takes 30 to 60 days to complete and the appraisal costs are higher as is the processing costs due to the process being more indepth. Interest rates are usually higher than those for residential mortgages.