well i dont know know exactly about it but my friend , who is involved in real estate busi. , is very much into this mortage stuff and such. i’ve heard her talking about this site… check it out may be its got something that can help you outhttp://www.freewebs.com/mortagefinance
What’s The Difference Between A Commercial Vs Residential Proper Mortage?
im a college student and quite new to real estate and the financing part is still quite beyond me. is there like a difference in % of the value you get or like rates? im quite confused in all this. thanks! =D
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4 comments - add yours
Chanj S
September 8, 2009
teran_re
September 8, 2009
Yes, there’s a difference. Look at the situation from a lender’s perspective, and you’ll understand why they want a higher interest rate for the higher risk.
Mr. Jones wants to buy two identically priced properties. He’s willing to put 10% down on each. He, his wife and children will live in one, and he will use the other as either a rental property, or to run a business out of (investment property or commercial property).
If you are the lender, and Mr Jones falls on hard times and only has the money to pay one mortgage or the other, which do you think he’ll pay?
Scott K
September 8, 2009
There are several differences. Most obviously, is the difference in property, one’s for a residence one’s for investment, industrial, or commercial use. The rates are almost allways significantly lower for the residential property (one of the other answerers pointed out the risk difference,) but it’s also based on the fact that an investor or entrepreneur will pay more for the money. Finally, the term is rarely more than 15 years for a commercial mortgage. Usually, the lender will want the opportunity to bail out if it’s looking like the picture isn’t rosy enough. Maybe the only tenant is having financial difficulties, maybe the borrower is a chronic late-pay, maybe it’s been determined that the property itself has some kind of problem that’s recently come to light.
annazzz1
September 8, 2009
Yes, you are confused. I think what you want to know is what is the difference in the mortgage rates for when you mortgage an owner-occupied property versus an investment property. The difference is that in an investment property, the risk the loan company takes is higher because basically you’re depending on your renter or leasor to pay you so that you can pay the monthly mortgage payment. That’s the reason why you have to pay a higher rate.
