Commercial Property Loans are similar to residential home loans in that a lender will allow you to borrow an amount of debt as a percentage of the value of the security property at a set rate of interest. The largest point of difference is that commercial lending is not regulated by the National Consumer credit Act (NCCP). Therefore, commercial property borrowers do not have the same consumer protection laws in place like regular residential lending.
How much can you borrow?
Below is a general guide on how much debt can be secured against a commercial property:
If valued up to $1m
If valued up to $2m
If valued up to $5m
You may be able to borrow up to 100% of a commercial property if it is also secured by a residential property. If the property is valued over $5m and up to $100m there are lenders who will look at this scenario, but only on a case by case basis.
Types of Security Properties
The uses of commercial property are quite varied, and include the following:
- Office Buildings
- Shopping Centres
- Land Subdivisions
- More than three units in one residential development
- Residential property development finance
There are also “specialised” commercial properties that a lender will lend against, however, these properties are considered higher risk and therefore the deposit required to purchase this type of property would need to be larger with a more detailed and therefore costly valuation being required.
- Aged Care, like residential care and respite centres
- Short Term Accomodation, like a motel, hotel or caravan park
- Private schools
- Petrol Stations, and specialised retail outlets
- Pubs and Clubs
- Car Yards
- Function Centres
- Income producing farms
- Child Care Centres
- Shopping Villages
- Land banking sites or Englobo land
Commercial Property Loan Fees
Unlike residential home loans, features are quite limited when it comes to commercial property loans, only basic features are offered.
- Offset accounts are only available with a select number of lenders
- Redraw is common, but not all lenders allow it
- Internet banking is generally available, however some lenders do not offer it
- Extra repayment sare available on variable loans
- Cash out available depending on the purpose
- Interest only repayments are available up to 10 years
- Loan terms are up to 25 years, however this can depend on the term of the lease
Commercial Property Loan Features
Fees are generally much higher for commercial mortgages than residential mortgages. Below is a list of possible fees associated with a commercial property loan:
- Application Fees
- Line Fee or Administration Fees
- Valuation Fees
- Lender Solicitor Fees
Application fees and interest rates are generally negotiable, so it pays to have an experienced mortgage broker on your side doing the negotiation on your behalf.
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