There are a few obvious differences, such as the purpose of the loan. Residential loans are to buy places for people to live, whereas commercial loans are to establish a place to do business. The terms are usually different, with residential mortgages commonly having loan terms ranging from 25 to 30 years, providing borrowers with long-term financing. Commercial loans on the other hand can range from 5 to 20 years, with balloon payments or refinancing required at the end of the term. 

The difference is also reflected in different interest rates, where residential mortgages generally have lower interest rates compared to commercial mortgages, reflecting the lower perceived risk for personal residences. Commercial loans usually require higher deposit amounts, too at around 20-30%.

The differences are subtle, but important. To help navigate this better, call our office and talk to one of our award-winning mortgage experts to see how you might fund your next commercial purchase.

The old saying, ‘location, location, location’ remains true for all property investment. When it comes to commercial property, position plays a significantly different and sometimes more complex role. Position is the property’s location and accessibility in relation to the type of business operating there. Things like close proximity to public transport, with good parking facilities and other amenities will generally demand higher rental prices. Position should always factor before the aesthetic aspects of a property. A modern fit-out in a retail setting will do nothing if the property is in an undesirable location. Foot traffic equals customers, so if they’re not attracting the right people, it might lead to tenants leaving and longer periods of vacancy.