Whether you are looking to buy a commercial property as a long-term investment or as an owner-occupier, it is important to always look at all your options and assess the right loan for you. When looking at finance for a commercial property there are multiple loan options from:
Fully verified loan application:
These loans will traditionally require more documentation to verify income, expenses, assets, and liabilities whilst also having stricter credit criteria. Whilst this may sound intimidating the benefits of a fully verified loan application is the best option to consider if you are focusing on a long-term investment. The lowest interest rate available, Low set-up costs
Low Documentation Loan:
In comparison to a fully verified home loan a Low Documentation Loan or Lo Doc for short. As the name implies the documentation needed for these applications is traditionally lower when assessing your income and expenses. This option is best suited for Self-employed applicants or company borrowers looking for a faster application turnaround without having to supply a large amount of documentation from the start they may not have this readily available. This may sound great in comparison to a fully verified loan but there are downsides, since the lenders are taking a risk by not asking for as much information most lenders will charge a higher interest rate, and depending on the situation can also charge a lenders Risk fee.
*Risk Fee: A risk fee is a fee paid by the customer traditionally on settlement instead of Lenders Mortgage Insurance (LMI)
Lease Documentation Loan:
Traditionally Full Doc and Lo Doc loans were the only available methods for purchasing or refinancing a commercial investment property. Nowadays some banks can bypass a lot of the paperwork with a lease doc loan. A lease doc loan does not require the lender to fully verify your income, instead, the lender relies on the strength of the rental income from your commercial property to secure the loan. The benefit of this loan method is the lender will ask for very little information in comparison to a fully verified commercial loan since they are relying on the current tenancy when assessing the income used to repay the loan. As a downside, this method cannot be used for an owner-occupied even if you are renting from yourself, there are exceptions but as a general rule owner-occupied loans are not eligible for a Lease Doc Loan.
Are you ready to buy or refinance your commercial property or have any questions on how to structure your first commercial purchase? Our team at Select Financial Services will work with you on developing and structuring a loan proposal to best suit your requirements.
Contact us today to find the Select Difference