![]() The principal portion of the payment amount goes toward paying down the original mortgage amount outstanding. ![]() Interest rates are generally either fixed or variable (often called floating). Interest rates vary by jurisdiction and other market conditions the risk of the borrower and the borrowing request also influence interest rates. ![]() This generally means much lower LTVs (loan-to-values) – more like 50%-75%.Ī mortgage payment is made up of two components – interest and principal. Commercial properties tend to have many restrictions on uses and, therefore, fewer prospective occupants.Understanding default risk for a rental property is even more difficult, as the lender will not have access to the tenant’s financial information – commercial mortgage deals for investment properties are analyzed based on the geographic location, the quality of the property, and the strength of the lease agreement (among others).Understanding the cash flows for a business operation requires a much more extensive analysis of the underlying business, including its financial health, management capabilities, and competitive advantage(s).The borrower isn’t servicing the mortgage with personal earnings cash to service the mortgage obligation comes from either business operations (if they run a company on site) or rental income (if it’s an investment property).The borrower is generally a company, such as a corporation or a partnership (although individuals can still own commercial properties).Residential properties tend to have very active secondary markets and, therefore, generally support higher LTVs (loan-to-values) – often up to 95%. ![]()
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