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4 Types of commercial mortgages you must know
The basic difference between commercial mortgage and residential mortgage is that this kind of mortgage is taken by businessmen. Just like a residential mortgage, one has to pledge collateral. However, the collateral of a commercial mortgage is a commercial building. You can get various types of commercial mortgages from the market. Go through the article to know about 4 simple types of commercial mortgages.
 
Types of commercial mortgages
 
The 4 simple types of commercial mortgages are given below:
 
  1. Fixed rate commercial mortgage: The interest rate of this kind of mortgages remains constant for the total loan term. This implies that you’ve to pay the same rate throughout the loan period. However, if you want to refinance a fixed rate commercial mortgage, then lenders will allow you to do it.
 
  1. Variable rate commercial mortgage: This kind of loan is more popularly known as adjustable rate mortgage. The initial rate of this kind of mortgage is lower than that of the fixed rate commercial loans. But the only drawback of this kind of mortgage is that the interest rates of these loans vary with time. If the interest rates fall, then you’ll be required to make low payments. But if the rates go up, then you have to make higher monthly payments.  
 
  1. Interest only commercial mortgage: In this kind of commercial mortgage, you’ll be required to pay the interest for first 3 to 5 years. This lowers your monthly mortgage payments for the first few years. However, as you're not making payments towards the principal in the initial years, your monthly payments will increase when the interest-only period ends.
 
  1. Balloon payments: This kind of mortgages extends over a short period of time, between 5 and15 years. You’ll only be required to make small monthly payments towards the principal and interest. This kind of mortgages provides immediate funds to the businessmen. Your balloon installment involves the outstanding principal and interest on the loan and might amount to thousands of money.
 
Finally, it is claimed that balloon commercial mortgages are unsafe for any business, especially if you’re planning to take out a commercial mortgage loan for the first time.
There is no guarantee that your business will prosper within the scheduled time. But the balloon payment definitely will.
 



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