A commercial mortgage is in essence very similar to a residential mortgage where the commercial building or property is used as the collateral to secure the loan.
There are 2 basic types of commercial mortgages and to which you can apply various terms. The two types of commercial mortgages include:
Nonrecourse Mortgage – With this type of commercial mortgage the lender can only lay claim against the property in the event you default on the loan. If you owe money greater than the value of the property, you will not have to repay any funds above the value of the property, and the lender can not come after personal assets
Recourse Mortgage – This type of mortgage allows the lender to attach your assets for any money still owing on a mortgage above and beyond the value of the property or building.
When taking out a Calgary commercial loan you can select the types of terms you want for the mortgage including:
• Fixed Rate Commercial Mortgage – This type of term allows you to get fixed interest rates on your commercial loan which is locked for the life of the loan. This often comes with fixed monthly rates where part of the rate you pay goes to the interest and the rest pays down the balance of the loan.
• Adjustable or Variable Rate Commercial Loan – Generally, you get the loan at low fixed rate for an introductory period and thereafter, you pay according to whether the interest rates go up and experience market fluctuation.
• Balloon Mortgage – This type of term allows you to only pay the interest each month and you do not have to pay anything towards the principal unless you decide to do so. Once you get to the end of the loan period, the entire amount becomes due, and this also gives you the opportunity to refinance the loan.
When deciding on what type of mortgage is most suitable for you, you always want to talk to an experienced realtor, broker or financial advisor to help you decide which type of commercial mortgage is right for your particular situation.
