There could be a situation in life when the requirement of funds arises. In that situation, your commercial property will come in handy. There are many financial institutions in the market that are ready to give you a handsome loan for the commercial property. Taking a loan for residential property is common but there are many people who want to take a loan Against Property for an office space or for an outlet.
There are a few things you should consider before taking a Loan against commercial property
Low loan to value ratio
Loan to value ratio (LTV) is the proportion of your property value that bank will finance or it is the financial term used by lenders to express the ratio of loan to value of an asset should be purchased. The remaining amount is known as down payment. In the case of residential property, the LTV ratio ranges between 75-90% but in the case of commercial property, it is restricted to a maximum of 55% commercial purchases. So, if your requirement is a hefty one, you may want to choose a lender who would give the highest value to your commercial property during the assessment.
The interest rate on payable for the commercial property is a bit higher than the interest payable on the residential property but as they are secured loans the interest rate is lower than the other personal loans. You would find the various rate of the interest rates of different lenders and you would certainly not want to find yourself strangled financially just because you end up paying more rate of interest. So, you should choose your lender very carefully, be double sure before getting into a deal with any loan company. The processing fees of the commercial property are comparatively higher than that of the residential property. In the case of residential you need to pat a maximum Rs 10000 but in case of commercial mostly you have to pay 1% of the loan amount.
The value of commercial property is generally higher than the residential property and the borrower may try to value the property higher to avail loan amount. The lenders also check them and verify the technical specification of the property like shafts, lifts, elevators, fire extinguishing arrangements, emergency exit, double staircase etc. The lender sends an authorized technical evaluation team to verify each and every technical detail and the property need to comply with all the required technical specifications.
Other things to know
Age of property
Older properties have lesser chances of being compliant with the technical requirement of the loan. Older properties might not have the basic modern requirement such as shafts, lifts, elevators, fire extinguishing arrangements, emergency exit, double staircase etc because of this the chances of getting a loan is declined.
The lender requires minimum area 250 sq. ft. If you have an area less than that a lender might reject your loan application but sometimes it varies lender to lender hence it would be advisable to check with all the banks and NBFCs before going to any solution.
The need to funds arise at any point of life and if you have a commercial property you can come out the requirement of funds by taking a loan against property.
The overall lending process is the same as the residential property. You would find many banks and Non-Banking Financial Companies (NBFCs) in the market who are ready to provide loan against commercial property. There are many things you must be aware of before going through the loan against commercial property such as Low loan to value ratio (LTV).
The value of the Commercial property is generally higher compared to residential property but the LTV ratio of the commercial property is lower compared to the residential property. The LTV of residential property ranges between 75-90% and rest is the down payment. On the other hand, LTV is restricted to a maximum of 55% commercial purchases in case of commercial property. Interest rate of the commercial loan against property is generally higher than the residential property.
The different lender has a different rate of interest you must check with all the lender in the market before going to any decision. There are no tax benefits on the repayment of interest of loan against commercial property. You must have a minimum area of 250 sq ft. Forgetting a loan. So these are the things you must be aware of the loan against commercial property before taking any decision it is suggestable go through all the important facts. You must make sure before going to the loan against the commercial property as there is no tax benefit on the repayment of loan against commercial property. So, these are the things you should consider while getting a loan against your commercial property.