Commercial mortgages represent a suitable financial product for those who want to purchase a property not intended for private residence. We are usually used to considering mortgage products as a loan exclusively reserved for residential purposes, but there are indeed also those designed for those who want to open a business or a small-medium business . While there are substantial similarities, there are also clear differences between commercial and residential mortgages for individuals, while the tools available to us to find the best financial proposals also in this specific sector do not change. So let’s see what are the characteristics, conditions and peculiarities of commercial mortgages.
The characteristics of commercial mortgages
If the characteristics of the home loan, in particular for the first home, are roughly known to anyone at least at a generic level, we can start from this knowledge to analyze the peculiarities of the commercial loan , or what are the substantial differences concerning the financing for those who buy a property for private use. In summary we have:
- Depreciation duration : does not exceed 20 years
- Amortization installment : mostly fixed rate, but instead of being monthly it is generally semi-annual
- Documentation : in addition to the classic guarantees and the registration of the mortgage, additional capital guarantees are required
- Property valuation : the maximum that can be financed is between 50 and 75 percent of the estimated value
- Clauses : many credit institutions require in the loan agreement the obligation not to change the intended use for a specific period, or not to sell or sell the financed property
How to find the best commercial mortgage
Digital communication tools come to our aid in the search for the best commercial mortgage offers available at a given moment on the credit market: it would be a mistake to rely on the first bank on hand, since the level of competition pushes credit institutions to propose financial products that are increasingly attractive from the point of view of conditions, or with particularly advantageous interest rates, or in the form of flexibility and customization mechanisms for debt amortization. In any case
It is highly recommended to use tools such as online comparators , which allow you to compare offers in real time and thus have an idea of the average financial conditions applied, and where you can have in your hands a particularly convenient proposal for your own needs and requirements.
Do not disdain also to pay a visit to the official website of a single institution, to obtain a free and no-obligation mortgage quote , to be able to evaluate the financial proposal in detail.
The documents to be presented
To submit the loan application, it is necessary to deliver to the branch a series of documents concerning income guarantees and the property intended for non-residential use. In addition to a valid identity document and the tax code, necessary to evaluate the name present in the financial circuit, the following are required:
- LTV, acronym that indicates the Loan to valu e, that is the percentage value that identifies the ratio between the required capital and the market value of the property, based on the intended use
- All the documentation of the property subject to the loan, including photographs of the interior and exterior of the room for which the loan is to be submitted, and any floor plan
- Tax return, open-ended or fixed-term contract with a duration of no less than the amortization period of the loan
- Copy of the certificate of ownership of the house of residence or the latest receipts of the rent
The copy of all other loans in progress may also be decisive for the granting of a commercial loan , so if there are personal loan contracts or other mortgages signed, leasing, financing aimed at various purchases, it will be necessary to submit them to the process preliminary investigation to verify the income consistency and ascertain the possible sustainability of the debt that would be contracted with the credit institution.
Obligations for the borrower
We have already mentioned it previously, but we summarize the obligations for the borrower linked to the provision of a loan for the property for non-residential purposes:
- Prohibition of transfer of the property
- Prohibition of alienation of the property
- Prohibition to change the intended use
All in a predefined period in the deed phase. If ever the beneficiary of the commercial loan changes the destination, authorizes the credit institution that disbursed the capital to request its repayment with an additional sum as a penalty , which must be explicitly reported in the loan agreement in obligation to the duties of transparency.
Commercial mortgages: are there concessions?
Just like loans for residential purposes, commercial real estate mortgages are also subject to concessions within certain conditions prescribed in Legislative Decree 185/2000, which is presented as a support for the creation and start-up of small-sized entrepreneurial activities from part of the unemployed or those seeking their first job. They can take advantage of these concessions
limited partnership (sas), in simple or collective name. Individual firms, joint-stock companies and de facto companies, cooperatives, and finally companies with a single shareholder are excluded from the concessions .
Alternatives to the commercial mortgage
If the search for commercial mortgages through the online search tools do not offer satisfactory results for your conditions, it is possible to evaluate some alternative options capable of guaranteeing the acquisition and possession of a property intended for non-residential use. We identify two, which can compensate for some limits of the commercial loan:
- Liquidity mortgage : a type of loan that can be aimed at the purchase of office or commercial properties, at a fixed or variable rate, obtaining an LTV of up to 80 percent of the estimated value. But above all it allows you to have an amortization plan extended up to 30 years
- Real estate leasing : introduced from 1 January 2016, this financing method allows you to cover 100 percent of the value of the property, which can be purchased in installments by paying a fee. The difference compared to the mortgage is that you do not become the owner of the property immediately, but the advantage is not being able to be subject to a foreclosure of the property for non-payment of installments as in the mortgage. Furthermore, both companies and professionals and self-employed workers can deduct VAT during the tax return phase
The choice of the unsecured mortgage
We talked about commercial mortgages, meaning by them real estate mortgage loans , which are not offered by all credit institutions (some of the best known in this field are Unicredit, Bcc, Bpm). For information, there is also an unsecured loan ,
which provides for the use of personal guarantees instead of a mortgage: but what applications does it have in the context of a property purchase for non-residential use? In general, this loan is mostly practiced for the purchase of durable capital goods . The amortization plans are rather short, equal to a maximum of 60 months, furthermore the financing percentages are often also conditioned by the possible presence of guarantee funds, so the amounts that can be obtained are generally of modest amount, little suitable for the acquisition of a property destined to become a shop, a studio or an office.
Is it possible to subrogate a commercial loan?
One of the most appreciable advantages introduced in the field of mortgages concerns the subrogation of the loan , that is the free transportability of the loan from one bank to another that offers more favorable conditions. If it is not a private citizen but a company with a mortgage on a commercial space, you can take advantage of the subrogation
only in the case in which it falls within the case of micro-enterprises , that is a company with fewer than 10 employees and which has an estimated turnover in the calendar year not exceeding 2 million euros. These are the requisites necessary to obtain a mortgage subrogation by companies that by definition do not fall under natural persons, the main recipients of this option.
The possibilities offered by commercial mortgages and by potential alternatives such as leasing make it easier to purchase a property for non-residential use, however it is good to take into account the limitations inherent in this tool to evaluate its actual convenience. From the LTV which is generally lower than the home loan, to the duration that does not exceed 20 years, there are different stakes set for the commercial loan that must be subject to careful evaluation before signing any loan agreement.