Loan against commercial property is basically a loan which you can avail by keeping your commercial property as a collateral. The property should be in the name of the person who is applying for the loan. A commercial property differs from the residential ones as it is only lent to businesses and built specifically for business use only. A loan against commercial property can be availed due to various reasons like business needs, marriage or any other personal reasons.
There will only be a “transfer of interest” on mortgage and ownership of the commercial property will remain with the borrower. The ownership only gets transferred when there is a default on the loan. This kind of loan is popular mostly because of the high loan amounts that can be secured and a longer tenure on the loan. Other popular benefits include low tenures, good tool for debt consolidation and funds can be used for personal or professional reasons.
Eligibility and necessary documents generally include proof of residence, proof of identity, latest bank statement with income of last 6 months, relevant documents for proof of ownership of commercial property. Banks do need financial statement of last 3 years if the borrower is self-employed.
The eligibility, obviously, also depends on the credit rating of the borrower. Credit rating depends upon various factors like income, age, assets, liabilities, continuity of occupation, number of dependents, qualification, income of the spouse etc. The loan against commercial property is either disbursed in full or in installments. This is specified by the buyer. More often than not, the buyer also has the option of choosing between fixed and floating rate of interest and whether he/she wants to pay in part of prepayment of the loan.
The loan extended would depend on the market price of the commercial property that is put as a collateral. However, we need to understand that full market price is never the loan amount. The bank keeps a little bit as margin money and generally only 60% to 70% of the market value is sanctioned as the loan amount. This will help in preventing banks from any fluctuations in real estate market.
At Finwizz Financial Services., we guide you with your application for loan against commercial property. From assessing the documents till the closing of the loan, we will be there for you throughout the process.