When it comes to purchasing a commercial property, securing the necessary financing can be a complex and daunting task. One option that buyers can consider is a full doc commercial property loan. In this article, we’ll explore what a full doc commercial property loan is, what you need to know before applying for one, and how it can benefit you as a buyer or investor.
What is a full doc commercial property loan?
A full doc commercial property loan is a type of loan that is used to finance the purchase of commercial property. The term “full doc” refers to the documentation that is required to apply for the loan. Borrowers must provide detailed financial information, including tax returns, bank statements, and other documentation that verifies their income and assets. This information is used by lenders to assess the borrower’s creditworthiness and ability to repay the loan.
What You Need to Know Before Applying for a Full Doc Commercial Property Loan
Before applying for a full doc commercial property loan, it’s important to understand the following key factors:
Eligibility requirements: Lenders have strict eligibility requirements for full doc commercial property loans. Generally, borrowers must have a strong credit history, a stable income, and sufficient assets to cover the down payment and purchasing costs.
Loan amount and terms: Full doc commercial property loans typically have higher loan amounts and shorter loan repayment terms than residential loans. However, the interest rates are also typically higher.
Collateral: The property being purchased serves as collateral for the loan. This means that if the borrower defaults on the loan, the lender can foreclose on the property and sell it to recoup their losses.
Down payment: Borrowers are typically required to make a larger down payment for a commercial property loan than they would for a residential loan. This is because commercial properties are considered riskier investments than residential properties.
Fees and closing costs: Like any loan, there are fees and closing costs associated with full doc commercial property loans. These can include valuation fees, application fees, and higher conveyancing/solicitor fees.
How Can a Full Doc Commercial Property Loan Benefit You?
There are several benefits to using a full doc commercial property loan to finance your purchase:
Lower interest rates: While full doc commercial property loans typically have higher interest rates than residential loans, they still generally have lower rates than other types of commercial loans. This can save you money in the long run.
Longer repayment terms: Because the loan amounts for commercial properties are typically shorter than for residential properties it’s important to know what full doc commercial property loans are available for set and forget over a 25-30 year loan term.
Flexible repayment options: Many lenders offer flexible repayment options for full doc commercial property loans, such as interest-only payments, quarterly, bi-annual, or annual payments. This can help to make the loan more manageable and tailored to your specific needs.
Greater borrowing power: With a full doc commercial property loan, you can borrow more money than you could with a residential loan. This can help you to purchase larger or more valuable properties, which can in turn generate more income for your business.
Potential tax benefits: Depending on your situation, there may be tax benefits associated with taking out a full doc commercial property loan. Consult with a tax professional to determine if this applies to your situation.
Final thoughts, a full doc commercial property loan can be an excellent option for buyers and investors who are looking to finance the purchase of commercial property. However, it’s important to understand the eligibility requirements, loan terms, and associated fees before applying for one. By doing your research and working with a reputable lender, you can secure the financing you need to make your commercial property dreams a reality.
If you require guidance and support when it comes to navigating full doc commercial property loans, please feel free to book a complimentary call with me here. I’m here to assist you and provide you with the information you need to make informed decisions about your commercial property purchase.