Commercial Mortgages
Hot Topics
- How Does A Joint Mortgage Work?
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When you decide to get a mortgage with another person – both your incomes can be taken into account. The general rule is that you can borrow three times the first income plus half of the second income, or two-and-a-half times the joint income.
- What Is Conveyancing?
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Conveyancing is the name of the legal process of transferring ownership from the seller to the buyer.
- What Are The Different Ways You Can Pay Off a Mortgage?
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Capital & Interest - otherwise known as a repayment loan. The borrower pays an amount each month to cover the amount borrowed and the interest charged on that.
- Is There Any Way I Can Lower My Monthly Repayments Without Switching Mortgages?
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If you find that you cannot afford your monthly mortgage repayments and do not wish to switch your mortgage to another lender – then you will need to negotiate new terms with your existing lender.
- What Happens If I Have Bank Defaults?
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If you have failed to meet payments on a credit agreement such as secured loans, unsecured/personal loans, credit cards, store cards or car finances etc, or you have failed to comply with your lender’s requirements, you will be described as having 'defaulted'.
A commercial mortgage is probably the best way to finance the purchase of buildings and land for business purposes, it provides the most flexible and affordable finance solution. Commercial mortgages are specialized due to the fact that the lender has a legal claim over the property until the loan has been repaid in full.
Remember when arranging a mortgage; always consider its effects on your cash flow and assets. This section will give you a general overview about Commercial Mortgages but it doesn’t replace professional advice in any way. You should always consult your accounting and financial advisors before finalising a loan to get the maximum benefits and avoid any complications.
Advantages and Disadvantages of Commercial Mortgages
Advantages:
- Retain Ownership: Instead of raising funds by selling a share in the property or the business to an investor, you retain complete ownership. The lender is only entitled to an interest return on its mortgage, not a percentage of ownership that an investor would expect. Also they can only exercise the right if you default on payment. You retain all the benefits of ownership in an asset that has the potential to increase in value.
- Tax advantage: Interest payments on your mortgage are tax deductible and are made with pre-tax money.
- Better Cash Flow: A mortgage gives you access to capital that you would not normally have axes to with minimal up-front payments and the flexibility to design a repayment plan that suits your needs.
- Simplified cash flow management: Mortgage schedules are at preset, making cash management more predictable.
Disadvantages:
- Collateral: The nature of a mortgage requires you to pledge the purchased property to the lender. If you default on the mortgage, the lender is able to foreclose the property and sell it to repay the outstanding money owed to the lender. Make sure when the mortgage is repaid; the lender is obligated to release the mortgage and is required to make available any government files acknowledging this release.
- Defaults: The lender may define a variety of events that will constitute a default on the mortgage, including failure to make any payment on time, bankruptcy, insolvency and breaches of any obligations in the mortgage agreement. Try to negotiate an advanced written notice of any alleged default, with a reasonable amount of time to cure the default.
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