1. Require a higher down payment, typically 20%.
2. Have shorter terms, typically 5-20 years with a large chunk paid at the end.
3. Have higher interest rates.
So you typically have higher carrying costs(monthly payment) associated with a commercial loan, there’s more risk because you have a balloon payment at the end of the term – or you have to refinance, and you cannot refinance out if the rates go down without a prepayment penalty typically.
Qualifying for a commercial loan is different…it’s based on income potential of the property. While a residential loan is based on your gross income and debt.
Here are a couple articles:
Business Finance Commercial Residential
Commercial VS Residential Loan Terms
Just my thoughts. -Jenn
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