What is an ideal loan term for a commercial property?

Share your concerns & ideas about commercial property loans in Australia.
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Mrs Robbins
Posts: 40
Joined: Fri Jul 19, 2013 2:25 am

What is an ideal loan term for a commercial property?

Post by Mrs Robbins »

Hello home loan experts,

A friend and I want to open up a retail store. We were thinking of taking out a commercial property loan to purchase a property for the store. However, we have no idea what kind of loan term is actually suitable for us.

Another friend of mine suggested that I could get some answers in this forum, so here I am. Can anyone here give me some information on the loan terms for a commercial property loan?

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Otto Dargan
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Re: What is an ideal loan term for a commercial property?

Post by Otto Dargan »

Hi and welcome to the forums Mrs Robbins.

Loan term is one of the many versatile features offered in commercial property loans. The most common loan term for a commercial property is 15 years. However, you also may also apply for a:
  • 30 year term: This term is available only if you put down a residential property as security.
  • 20 - 25 year term: Some lenders may provide you this term if you put down a commercial property as security.
  • 5-7 year term: This kind of term is most common for commercial equipments.
  • Shorter terms: Shorter loan terms are generally offered for invoice discounting, short term business loans, and development loans.
It is recommended that you look for a loan term that matches your ability to make the repayments. If you can make large payments at a time, then it may be better if you go for a shorter term. However, if you are looking for lower periodic repayments, then you may be better off looking for a longer loan term.

Cheers,
Otto
Otto Dargan
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Mrs Robbins
Posts: 40
Joined: Fri Jul 19, 2013 2:25 am

Re: What is an ideal loan term for a commercial property?

Post by Mrs Robbins »

I was about to ask if I could get a loan for commercial equipments. Thanks for answering that.

Anyway, I’ve heard that some lenders allow borrowers to pay just the interest for a couple of years. Is it actually true?

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Otto Dargan
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Re: What is an ideal loan term for a commercial property?

Post by Otto Dargan »

Hi Mrs Robbins,

It may be possible to negotiate interest only repayments with some commercial lenders. You may be able to get an interest only term of:
  • 15 years, only if you put down a residential property as security.
  • 5 years from some specialist lenders.
  • 1–2 years, which is the most common interest only term for commercial loans.
You can check our our website for more information on commercial loan features. If you want to talk to one of our brokers directly then you can reach us on 1300 889 743 or fill in our free assessment form and one of us will help you assess your situation.

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

Mrs Robbins
Posts: 40
Joined: Fri Jul 19, 2013 2:25 am

Re: What is an ideal loan term for a commercial property?

Post by Mrs Robbins »

I just had a meeting with my friend and we’ve decided to go with a 20-25 year loan term with an interest only term of two years. I’d like to thank you for giving us such useful information. I’ll need your help to get our loan approved so I think I’ll be giving you a call by the end of next week.

dawnmason
Posts: 47
Joined: Thu Jun 27, 2013 3:43 pm

Re: What is an ideal loan term for a commercial property?

Post by dawnmason »

Hi,

I’m from Adelaide and I’m looking to take out a commercial property loan. I had a number of suggestions from my friends but most of them weren’t based on any professional expertise. I need advice from a professional so I’ve turned to this forum.

Anyway, I had similar queries to Mrs Robbins here and going through this thread, I was able to find answers to most of them. But I’ve got one more question. Among the various features on commercial loans, how do I choose the best fit for me?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: What is an ideal loan term for a commercial property?

Post by Otto Dargan »

Hi dawnmason,

Which loan features work best for you may depend on your needs as a commercial property investor. If you are looking to make:
  • Lower repayments, then you may ask for a longer loan term and an interest only period.
  • A small deposit, then you may be fit for a higher Loan to Value Ratio (LVR) or an unsecured overdraft.
  • Seasonal repayments, then it may be best to ask for an unsecured overdraft.
  • Reduced interest payments on a large loan, then a bank bill facility may be best for you.
  • Additional repayments, then a variable rate loan may work out as a perfect fit for your situation.
You always can look for competitive interest rates or low application fees if you think none of the above options may be suitable for you.

You can give us a call if you want to know more about unsecured overdrafts or if you want help to get the most suitable loan features for your situation.

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

dawnmason
Posts: 47
Joined: Thu Jun 27, 2013 3:43 pm

Re: What is an ideal loan term for a commercial property?

Post by dawnmason »

I just went through your website and I think it’s amazing. Great job, man! I’ll make sure I recommend you guys to my friends and family. I need to discuss my situation in detail with you guys because I still haven’t been able to decide what’s best for me. So I’ll give you a call sometime next week. Cheers, mate!

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