Is your business ready to expand? Do you want to take the next step and own the commercial property your business operates from? If so, you may be wondering how to finance such a major expense.
At Loan Monster, we’re always looking out for you. Spend less time worrying about researching loans and more time running your business.
If you need to borrow money to buy an office property, you can take out what’s called a commercial property loan. With a commercial loan, you can fund the purchase of commercial properties such as offices, warehouses, factories, shops, and any other property the bank identifies as not residential.
You can take out a commercial loan to buy a property you plan to use either for your business or as an investment. A commercial property loan is similar to a home loan, but with some significant differences.
Council zoning also determines whether a building is commercial in nature. For example, mixed properties with a combination of residential and commercial uses are generally considered commercial.
Commercial property loans are perfect for businesses looking for an office property to use as premises. They can also be suitable for experienced investors wanting to extend their real estate portfolio. As a business, owning your own premises means control, room to grow, and the ability to customise your space.
You’ll need to make sure you’ve got your ducks in a row before taking out a commercial property loan. Some things worth considering are;
If you’ve bought a residential property before, you’ll understand how property loans work. There are similarities – you borrow a set amount of money, make loan repayments at either a variable or fixed rate, over a set term, on either a principal or principal-plus-interest basis. But there are a few extra things to consider when you’re buying commercial property.
Commercial loans tend to be straightforward, as they are not as regulated as residential loans. Here are a few things to be aware of.
Unlike a home loan, a commercial property loan requires at least a 30 percent deposit. It’s also important to note that commercial property loans are not covered by Lenders Mortgage Insurance.
You will need to pay GST on a commercial property. However, there can be benefits as you may be able to claim back the GST back of the property’s rent. We recommend discussing your GST options with your accountant.
Fees and interest rates can be higher for commercial property loans. While banks absorb many fees for a home loan, these go to you when you’re taking out a commercial property loan. Interest rates for commercial property loans can vary, depending on your circumstances.
If you provide a sizeable deposit and a profitable business, lending to you is low-risk, so you could access lower interest rates than you would for a residential property. On the other hand, if your position isn’t as strong, you may only be able to access higher interest rates.
The maximum, and most popular, loan term for a residential property loan is 30 years, but loan terms for commercial property loans are much shorter. Depending on who you borrow from, your commercial property loan term could be between six months and 15 years.
At Loan Monster, we’ll navigate these considerations to find you the best value commercial property loan for your individual circumstances. Get in touch to talk to one of our brokers in Fremantle or online.
If you’re ready to own your commercial premises, speak to our mortgage brokers at Loan Monster in Fremantle. We can help find a commercial property loan for your business today.
There are a few different ways to be eligible for a commercial property loan. Each option has a different impact on the speed you can get your loan approved, the amount you can borrow, and the interest your loan accrues.
At Loan Monster, we can help you decide which type of loan will suit your business: full-doc, low-doc, or no-doc.
Full-doc loans require you to provide the lender with all the documentation needed to assess your financial position. That means any paperwork like;
Full-doc loans can take longer to approve due to the time it takes to investigate your financial situation. They generally offer a more competitive interest rate than other commercial property loans.
When you apply for a low-doc loan, you only need to declare your income and ability to repay the loan amount. You don’t need to show the bank any financial statements or tax returns. This is ideal for people who are self-employed or anyone who doesn’t have much documentation to prove their financial situation.
Another benefit of low-doc loans is that the application process is usually quicker than a full-doc loan. However, these low-doc loans generally have higher interest rates. As a full assessment of your business hasn’t taken place, they are considered a higher risk investment.
No-doc loans require no documentation and no declaration of income. These are the least common type of commercial property loan and accrue a high amount of interest due to the high risk the lender is taking. No-doc loans may suit those who don’t work in traditional business structures, so don’t have paperwork to prove their finances.
With the planning and effort you need to put into buying a property for your business, the last thing you should worry about is searching for a business loan. Get in touch to speak to one of our friendly brokers about purchasing a commercial property and taking the next big step for your business today.
