Commercial Mortgages

Commercial mortgages work a little differently than residential mortgages. The difference is that the collateral used for commercial mortgages is a commercial property or business real estate, whereas, a residential mortgage relies on the residendial property for collateral. For commercial mortgages or residential mortgages the property is used as collateral or the guarantee to secure repayment of the loans. Commercial mortgages are most often used by businesses to purchase business real estate. In this case commercial mortgages are preferred over property mortgages taken on by individual borrowers.

For commercial mortgages the borrower is not an individual. Commercial mortgages are associated with companies that may be in a partnership, an incorporated business, or limited company. When commercial mortgages are needed, assessing the credit worthiness of the business making the application for the commercial mortgage can be considerably more complex than is the case with residential mortgages.

Commercial mortgages are most commonly nonrecourse. This means that in the event of default in repayment of the commercial mortgage, the lender can only seize the collateral. The lender has no further claim against the commercial mortgage borrower for any outstanding balance. Regarding commercial mortgages,  many laws are weighted to prevent the lender from pursuit of the borrower for any deficiency. Commercial mortgages are structured for sale as bonds. Thus, commercial mortgages are assigned a higher priority due to the liklihood of being positioned to receive income. Commercial mortgages inherently necessitate a clause which permits the lender to take control of the property immediately.  For commercial mortgages, this happens despite the fact that the borrower may be in bankruptcy proceedings. Once in a while, the commercial mortgage is written in such as way to oblige the borrower to pay the debt in full. This happens with commercial mortgages even if foreclosure on the mortgaged collateral (property) does not cover the outstanding balance owed by the borrower. Contact Strong Business Credit for more information about commercial mortgages.