Property development finance is offered by banks and lending institutions for purchasing, renovations or any building, engineering or other operations. The borrower shall pledge or mortgage a property (usually real estate) in favor of the lending or financing institution as a collateral or assurance against the borrowed money. This financial activity is managed within the ambit of law.
A legal agreement is drawn and signed by you that shall pass the conditional rights of your ownership of the property or asset to the bank or lending institution (mortgagee) as a guarantee that you shall return the loan under the terms and conditions agreed upon. The property is released upon repayment of the loan.
LEGAL LANGUAGE AND YOU
Like any other business, timing of the loan is crucial to help you with your residential development and the securing of finances. And most banks have long complicated process and legal jargons written in refine lines. A legal expert is required to decipher the sugar-coated wordings to ensure that you understand the process of financing the property. The financing institutions have the experts to guide you through the legalities of the agreement/documents. The agreement is for your plan to do any kind of development, be it residential, commercial, renovation, part-built, conversion or constructing a new building. Yes, you have to convey the purpose of financing, if the property is to be sold, to be let or a holiday let.
Office buildings, shopping centers, apartment complexes and industrial warehouses are commercial properties. A loan secured by using anyone of the above properties is known as commercial mortgage. The design of the loans from commercial mortgages is expected to be used to acquire, refinance or redevelop commercial property.
The design of the commercial mortgages is structured to ensure the borrower avails the maximum financial facilities to facilitate the requirements. Similarly, the loan proceeds, interest rate, term and amortization by the lending institution is secured.
The commercial mortgages go through forensic examination before closing, particularly, the value of the property and the financial strength of the property owner.
SUBSTANCE OF COMMERCIAL MORTGAGES
The commercial loan has to be exact to cater your needs and the bank can sanction up to 75 percent loan to the appraised value of the property. On the average the term of the loan can range between 5 to 20 years and the interest rates can be variable or fixed, accordingly. The mortgage interest can be paid either monthly or quarterly that best fit your needs.
There are several types of loans available with flexible facilities offered by different lending institutions.
Bridging Loans are short term loans that act as a bridge between the time needed to fund a big amount business purchase and arrangement of longer term financing.
Property Development Finance is primarily a residential buy to let mortgage.