Learn About Commercial Property Loans
Posted on August 20, 2010
Filed Under Debt Relief, Loans, Mortgage, Personal Finance, Refinancing Solutions | Leave a Comment
Commercial property loans are commercial loans made which use real estate as collateral.
Like residential property loans, a building will be used in order to secure repayment from the debtor except the collateral is a commercial building instead of a residence. Additionally, a business will take on a commercial property loan most of the time, rather than an individual.
Borrowers in commercial property loans can be many different types of business entities. This makes the assessment of the credit of the borrower much more difficult than it is with borrowers in residential property loans.
In some cases, commercial property loans are nonrecourse. What this means is that in the event of default in repayment, the creditor may only seize the collateral, and has no further claim against the borrower for any other assets. The reason for this is twofold: there are sometimes laws that significantly prevent the creditor from going after the borrower for any deficiency, and mortgages structured for sale as bonds will tend to give a higher priority to constantly receiving some sort of income and therefore require a clause that allows the lender to take the property immediately, regardless of bankruptcy proceedings that the borrower might be going through.
A commercial property loan can possibly be supplemented with a general obligation of the borrower, as well as with a personal guarantee from the owner of the property, which makes the debt payable in full, regardless of whether or not the foreclosure on the mortgaged collateral doesnt satisfy the outstanding balance.
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