Commercial Mortgages

Written by Beth Hrusch
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Commercial mortgages come in a variety of packages. A lending company that specializes in these types of mortgages will know which option is right for any given situation. Commercial loans are usually on a much larger scale than conventional loans for the purchase of real estate. They also tend to be more complex. Certain rules and regulations govern commercial lending and factors such as multiple business partners must be taken into account. Thus, the type of commercial loan taken must fit exactly.

Types of Commercial Mortgages

Commercial loans involve any kind of public construction project. This could be a plan for the renovation of a city block, the construction of a golf course or shopping center, or demolition of existing structures to make room for a parking garage. Acquisition and development financing refers to loans that pay for the purchase of land, machinery and materials for the purpose of community development. This includes utilities and street improvements as well as construction of new buildings.

Commercial mortgages can have adjustable or fixed rates. With an adjustable commercial mortgage, or ARM, the rate changes periodically according to an index. A construction mini-perm is a short-term solution for financing the construction of a rent-producing structure. Once the rents start stabilizing, this kind of loan can be converted to a conventional loan. Interim loans provide financing at a floating rate, and allow the cash-strapped borrower to get started on a commercial project right away.

Other commercial mortgages such as take-out loans give the borrower an initial loan to get started with a construction loan then pay it back with a follow-up loan. Other options exist, all designed to handle the needs of developers and other parties interested in public projects and income-producing ventures. Ultimately, commercial loans serve both the borrower and the community.

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