Commercial Property Loans Need Careful Estimates of Likely Income to Facilitate Repayment

Commercial property is a property that can generate income from rent or give you capital gains if it is sold. Warehouses, office buildings, land that has not been developed or even an apartment building that is leased out can be considered as commercial property. Commercial loans for property allow you to acquire these assets.

The best loan is that in which you do not have to put down any deposit or can restrict this to an amount that you can quickly arrange. The traditional route to obtaining commercial loans in Australia is to go to banks. Most banks will finance up to 90 percent of the value of the property after you have convinced the loan officers that your property is commercially viable. If you have a good credit rating, you can even convince the bank or other lenders to lend you the balance amount against your available credit. Interest rates for commercial property loans are high but can be negotiated. Previous dealings and records of prompt repayment can always convince lenders to lower rates and grant acceptable terms.

You can also arrange such finance for the acquiring of a commercial property by bringing in investors or partners who can put together the required amount for the acquisition. You will need to prepare a proper presentation to convince the likely investors of the soundness of the proposition. It is also necessary that any agreements made are properly documented and made into legally enforceable contracts that are beneficial to all the parties in a contract.

Before you decide on taking out a loan for any commercial property, it is best if you do a proper research on the property to ensure that you will gain proper legal title to the property and that it has no encumbrances. You will also have to make an appropriate cash flow estimate that is feasible and practical and verifiable by the agencies to whom you apply for a loan. While deciding on rental income, you will have to make informed guesses on the occupancy factor and not be over optimistic. Real estate agents who are working in that area will be good sources of information about the potential of rental income from commercial property. Your income from the property should be able to meet the required loan repayments and also ideally leave you with a surplus. You need to factor in taxes, utility bills and maintenance requirements when you make projections.

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What are construction loans?

What is a Construction Home Loan?

Home renovations in Australia have become even more popular in recent times. House prices are increasing and people are weighing up whether to buy an existing home or build a new one or if they already own an existing home whether to renovate or sell and buy a new home.

The stamp duty savings combined with the equity that can be created when building a new home can mean that the cost of building compared to buying a newly finished home is significantly less.

To meet the finance needs of people borrowing to construct their new home, banks and other lenders have developed specialist home loans for construction typically called construction loans.

Construction home loans come in different types. There are construction loans designed for self-employed people that do not yet have all their financial records such as tax returns in order to prove their income a capacity to repay the loan. These are typically call low documentation construction loans or low doc construction loans. Most construction loans require you to engage a licensed builder however, some lenders also have construction loans for people building their own homes. These are typically called owner builder loans. Owner builder loans are stricter than ordinary construction loans that have a licensed builder doing the construction work. This is because there is more risk that the owner builder will not be able to finish their project on time and budget, as banks and lenders have data that shows owner builders are less likely to finish on time and budget.

How Does a Construction Home Loan Work?

Construction loans are set up so that you only borrow enough money to cover the costs when they are incurred. That is once the builder finishes a stage in the construction they invoice the owner, the owner then receives the funds from the bank or lender. In this way the borrower only pays interest on funds that are used. It also means that the lender can make sure that what is borrowed matches the value of the construction. This is important for the lender as if anything goes wrong the lender will want to ensure that it can get its money back by selling the property. It can also benefit the borrower as the builder cannot charge them for work that has not been completed.

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Use a mortgage broker or go direct to a bank?

Borrowers are now more than ever inclined to use a mortgage broker than go direct to a bank. This is because they can compare and recommend products from as many over 30 different lenders, but according to Melbourne mortgage broker Oak Laurel.

 

Why use a Mortgage Broker?

The reason that Mortgage Brokers have become so popular in Australia and continue to gain popularity is because they make finding the best loan easier. Good mortgage brokers have a computer software that can search through and compare hundreds of different loans using different criteria from the lenders that they have on their panel. This saves borrowers a significant amount of time and effort and is more efficient in comparing options..

A good mortgage broker will have a good understanding of how the loan process works and the lending criteria used by the different lending institutions. This can make for a much faster loan application process and get you a better deal.

Finding a good mortgage broker in Melbourne

Only use a mortgage broker who is a member of the Mortgage Industry Association of Australia (MIAA) or the Finance Brokers Association of Australia (FBAA) as this is a standard requirement for a mortgage broker.

Use a mortgage broker that know the type of finance that is best for people in your situation. For instance if you are an investor use a broker that knows about investment loans. Still not sure which broker to use? Contact melbourne mortgage broker Oak Laurel especially if you have a special lending need.

As with all financial services and major purchases, your broker should provide you with at least three quotes from different lenders. In this way you can feel confident you have obtained the best possible deal.

Ask your mortgage broker why they are recommending the loans that they have. The answer should be associated with the requirements that you provided to them when completing the client needs analysis. Some lenders pay higher commissions to the broker than others and an unscrupulous mortgage broker may try and steer you to the loan with the highest commission.

 

 

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