Do banks assess all commercial properties in the same way?

Share your concerns & ideas about commercial property loans in Australia.
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Severus Snape
Posts: 35
Joined: Mon Jul 15, 2013 1:26 pm

Do banks assess all commercial properties in the same way?

Post by Severus Snape »

Hi. I’ve been working for an organisation as an IT manager for over two years. I earn $92,000 a year and I want to buy a commercial property. I think I’ve got a sufficient amount of genuine savings and so I plan on taking a commercial property loan.

Do banks classify all commercial properties the same? I want to know if banks assess different commercial properties differently.

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Otto Dargan
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Re: Do banks assess all commercial properties in the same wa

Post by Otto Dargan »

Hello Severus Snape, welcome to the forums.

When applying for a commercial property loan, lenders consider different types of security as different types of risks.

Standard commercial properties are considered less risky, which is why they may be approved more easily. Some examples of standard commercial properties are:
  • Residential.
  • Offices.
  • Factories.
  • Warehouses.
  • Shop fronts.
  • Retail space.
This type of property is classed as having a wide appeal, is in a good location and is zoned as residential, commercial, industrial or mixed.

As specialised commercial properties are more difficult to sell, they pose a higher risk to the lender. Some examples of specialised commercial properties are:
  • Accomodation.
  • Aged care centres.
  • Car yards.
  • Child care / preschools.
  • Farms / other rural properties.
  • Function / reception centres.
  • Land subdivisions.
  • Petrol stations.
  • Property developments.
  • Pubs / hotels / taverns.
  • Restaurants.
  • Shopping villages / centres.
You may need to have a large deposit to get your loan approved in case of this type of property. This is because specialised commercial properties generally require a detailed valuation and risk assessment from the lender.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Severus Snape
Posts: 35
Joined: Mon Jul 15, 2013 1:26 pm

Re: Do banks assess all commercial properties in the same wa

Post by Severus Snape »

Oh, I see. I was thinking of buying either an office or a retail space. Can you tell me how much I may be allowed to borrow?

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Do banks assess all commercial properties in the same wa

Post by Otto Dargan »

Hi Severus Snape,

Although commercial lenders may each have their own risk profiles and maximum loan amounts, you may be able to borrow up to:
  • 80% of the property value for loans up to $1 million.
  • 75% of the property value for loans up to $2 million.
  • 70% of the property value for loans up to $5 million.
Loans from over $5 million to $50 million are assessed and approved on a case by case basis.

It should be noted that the type of loan and the nature of your security may have an effect on the amount that you can borrow:
  • You may be able to borrow 100% of the property value if a residential property is used as a security.
  • You may require a larger deposit for lease doc, low doc and no doc loans.
  • A larger deposit may also be required for specialised security properties.
You can check out our website for more information regarding commercial property loans. You can call us directly on 1300 889 743 to discuss your loan needs or you can enquire online.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Severus Snape
Posts: 35
Joined: Mon Jul 15, 2013 1:26 pm

Re: Do banks assess all commercial properties in the same wa

Post by Severus Snape »

Thank you very much for the info, Otto. I’m gonna call you by the end of this week to discuss how to follow through with my plans. I’m looking forward to chatting with you.

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boon
Posts: 53
Joined: Wed Jun 24, 2009 1:34 pm

Re: Do banks assess all commercial properties in the same wa

Post by boon »

Hello everyone. I wanted to take out a commercial loan but I realised that I might not have a good credit history. Can I still apply for one despite my credit history? I would also like to know what records count as bad credit and what do not.

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Do banks assess all commercial properties in the same wa

Post by Otto Dargan »

Hi boon,

You may be able to take out a bad credit commercial loan if you have a bad credit history.

A bad credit history may include one or more of the following records on your credit history:
  • Defaults
  • Judgements
  • Court writs
  • Liquidation
  • Bankruptcy
  • Part IX
  • Part X
The record of the above will show up on your credit file or the credit file of a company which you are the director of. Thus, credit files of your companies matter even if they may not be the borrowing entity.

The following types of bad credit do not show up on your credit file:
  • Your commercial loan is in arrears.
  • Breaching the terms of your business loan.
  • Not paying the loan off at the end of the term.
  • Overdrawing your business bank account.
  • A past problem with a particular bank.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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boon
Posts: 53
Joined: Wed Jun 24, 2009 1:34 pm

Re: Do banks assess all commercial properties in the same wa

Post by boon »

I got my answer, thank you. I went through your website and it helped me find out even more. I recommended you guys to my friends as well. Bye.

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