Most people who talk about acquiring a mortgage or taking out a loan for a property usually talk about a home. In contrast, a loan for commercial property Singapore is more difficult to find information about, especially if the property you purchase is for your business or investment interests.
Purchasing a commercial property appears similar to purchasing a home at first glance. Viewing properties on the market or working with a real estate agent leads to making an offer on a property, followed by securing financing.
But there are some differences between a commercial property sale and a residential property transaction regarding how you should secure a loan.
Commercial Real Estate Loan
When you hear the term “commercial property loan,” you might assume that it refers to a loan used to purchase commercial real estate. The term “business property loan” is also used to describe these types of loans.
Types of commercial mortgages: those with a predetermined interest rate and those with an adjustable interest rate. Check out mortgage loan comparison Singapore. Before floating and thus subject to change, interest rates on fixed-rate loans are locked in at a set rate for a while. Alternatively, interest rates on floating-rate loans change throughout the duration, resulting in various monthly repayments.
What Affects the Money You Can Get?
- The money you can borrow for a residential property loan varies from bank to bank, with the property’s value being the most important factor aside from your financial situation and credit score.
- When it comes to commercial loans, the bank will take into account a wide range of variables when deciding how much money to lend you, such as what the property will be put to use for, how much money it will bring in, and how much risk the bank perceives.
- Amount of Loan to Value (LTV) for Commercial Property in Singapore
- Residential properties can be financed up to 85 percent of the purchase price or valuation for HDB-granted loans and 75 percent for conventional bank loans.
- TDSR (Total Debt Servicing Ratio) regulations do not apply to businesses. As previously said, the amount of money you can borrow is determined by your financial situation.
What Is the Length of a Loan’s Term?
Commercial property loans in Singapore have a shorter loan term than residential loans. Commercial real estate loans typically have 25 to 30 years with most institutions. On the other hand, commercial property loans typically have higher interest rates.
The more time you have your loan, the more money you’ll pay in interest. Due to all of these considerations, taking out a business property loan may become more difficult.
Who Could Benefit from a Commercial Real Estate Loan?
Purchasing commercial property differs from purchasing a home in that it is more often than not a business choice instead of a personal one. As a result, if you plan to buy as an owner-occupier, you must research the property market and the type of property and location that will best meet your business’s needs.