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What Investors Should Know About Commercial Real Estate Loans

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For those who don’t know yet, commercial real estate loans are mortgage loans that are secured by liens on a commercial property.

They are typically made to business entities like developers, corporations, partnerships, trusts, funds, and more. Often, these entities mentioned are created for the sake of owning a commercial real estate.

The terms of commercial real estate loans may range from more or less five years to 20 years. Its amortization period is likewise lengthier than the term of the loan.

Before you go ahead and settle for a commercial loan, make sure you know these three important things:

Commercial loans may either be a recourse or a non-recourse

In a recourse loan, the borrower is held responsible for the completion of the commercial real estate loan. This means the lender would have the right to collect any balance owed to them even after they’ve had the collateral. This is especially true if a commercial mortgage goes into default.

In a non-recourse loan, the lender is prevented from collecting what they own or from taking possession of the underlying real estate collateral.

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