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A commercial mortgage is similar to a residential mortgage, except the collateral is not a residence, but a commercial building or other business real estate. Typically the mortgage is arrange by a business. Because the business may be formulated as a partnership or limited company the assessment by the lender as to the creditworthiness of the business is more complicated. The length of the loan usually runs from 5 to 30 years. WHY USE A COMMERCIAL MORTGAGE Common applications of commercial mortgages include: construction of a new building, purchase of premises, expansion of facilities or modification of existing premises. INTEREST RATES Interest rates are usually higher than for a mortgage over residential property. The most common variant of commercial mortgages is a fixed rate commercial mortgage where the interest rate remains constant throughout the term. Loans can also be variable or capped. A second commercial mortgage is an additional loan on a commercial property secured behind that of the first lien. SEE ALSO |
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