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Important Facts About Commercial Mortgages

Having money always can be used to bring in more money. This well known idea has been put into use by lenders who deal in commercial mortgages. The money is loaned to real estate owners while the building or piece of real estate is held as collateral. When you consider a home mortgage and a commercial mortgage, they are actually very similar. With a home mortgage, the house is the collateral and in a commercial transaction, the building is the collateral. A borrower for a commercial mortgage may be a business owner who uses the property to conduct their business. Just as in a home mortgage transaction, the credit of the business is checked before the loan is given.

It is the collateral that secures the mortgage. The mortgage lender takes the property in the event that the borrower is unable to meet the payments. This is how the mortgage lender is protected in the transaction.

A mortgage by a business may be used to expand the business, buy more property, or to pay off business debt. The property may be used to store products or to manufacture products. Commercial properties can be office properties as well. The mortgage may have a variety of ways that the borrower will pay off the debt. This is called the terms of the loan.

Banks and mortgage lenders make money whenever they lend money to businesses and commercial borrowers. The interest paid on the loan is the profit that is made for the bank or lender. The lender will determine in advance if the business has the funds to pay back the loan, if the expansion prospects are likely to bring in additional funds and the credit of the commercial borrower. The lender is in business to make money from the transaction.