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| 22 Nov 2006 ::: News
Header Common applications of commercial mortgage loans include acquiring land or commercial properties, expanding existing facilities |
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| 22 Nov
2006 ::: News Header A second commercial mortgage is an additional loan on a commercial property secured behind that of the first lien. The second mortgage is subordinated to the first mortgage and therefore usually carries a higher interest rate. |
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addition, commercial mortgages are typically taken on by businesses
instead of individual borrowers. The borrower may be a partnership,
incorporated business, or limited company, so assessment of the creditworthiness
of the business can be more complicated than is the case with residential
mortgages.Commercial mortgages are typically nonrecourse, that is, that in the event of default in repayment, the creditor can only seize the collateral, but has no further claim against the borrower for any remaining deficiency. Less commonly, the mortgage is supplemented by a general obligation of the borrower, which makes the debt payable in full even if foreclosure on the mortgaged collateral does not satisfy the outstanding balance.  Unlike
almost all residential mortgages, the majority of Commercial Mortgages
in the United States, while requiring the borrower to simply make
a monthly payment small enough to pay off the loan over a 25 to 30
year time frame, require a balloon payment (a total payoff) after
a lesser time frame, such as 10 years. The borrower most likely will
attempt at that time to refinance the loan. Thus there are two elements
generally to the term of a commercial mortgage loan: the length of
time allowed until balloon payment (known simply as the term), and
the amortization. The length of the loan can vary from 5 to 30 years. |
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