Commercial and residential loans function in different ways for different purposes
Residential loans are used to purchase residential property (as you probably surmised). Residential properties are typically between 1 – 4 units.
The interest rate is fixed and the loan is amortized over longer periods of time. The most common being a 30 year amortization period.
Commercial loans, as you probably guessed again, are used to purchase commercial property. Generally speaking, you will need a commercial loan to purchase properties 5 units and up.
The interest rate on commercial mortgages will usually be higher than residential loans. Another key difference is the amortization schedule is usually shorter. Most of the time it is between 5 – 10 years and sometimes 20 years.
The payment schedule, however, can be spread out to a longer period of time. For example, the loan can be for 10 years but the payment schedule would be as if you are paying off a 20 year mortgage.
The information above is a general overview and will vary on a case by case basis for the qualified buyer.
If you have further questions and would like to discuss in greater detail, please contact me here:
Robert O’Keefe – ROK Realty
Broker of Record – Keller Williams Park Views
[email protected]
201-372-4084 (text/call)
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