By Ricky Lim
A commercial mortgage is what can be described as the use of real estate as collateral for a mortgage to secure payment. The difference between a commercial mortgage and a residential mortgage is only the type of land used.
The rates may slightly differ but they are generally the same. A commercial mortgage is also taken by a business entity rather than an individual borrower.
In this case you will find that the assessment of such collateral will be quite tricky. This has led to trickier commercial second mortgages. This type of mortgage is normally used in conjunction with a first loan that is new.
People who take commercial second mortgages should be sure to take such steps when there is no other plausible alternative. You will find that the two mortgages can be a problem to service and this might result in the loss of the property that was securing the mortgage.
At the same time, there are very many advantages that can come as a result of taking up this option.
The first advantage that one can get from getting this type of loan is what is known as a reduced LTV (Loan to Value) of the previous loan. This will mean that you will be able to easily qualify for the second loan.
A good example is when the first mortgage holder will give you a loan of 70% of the LTV. This will mean that you will only have a 20% down payment. In retrospect, this means that a second mortgage can be sued to make the difference.
This is what entails the basic process of any of the commercial second mortgages. Since the property is commercial, the idea is to let the property gain value.
Commercial property will appreciate in value at a stead and rapid pace. This appreciation will be faster than the interest rates that the mortgage company has given you.
This means that you can be able to get time to clear the first mortgage at a comfortable pace when you take the second mortgage.
This is why most of the financial advisors will tell business people to take commercial second mortgages so as to reduce the strain of paying the first mortgage.
This is the reason also the reason why the business that had a second commercial mortgage did not suffer when the global financial crisis and the recession hit the international economies.
Article Source: http://EzineArticles.com/?expert=Ricky_Lim
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