A commercial mortgage is an easy way of extending your business property-wise. It is fundamentally a loan that you use in refinancing and/or restructuring the property of your business.
But is a commercial mortgage viable at any given time? Definitely not! Is it good to buy property? Of course, but it depends on a variety of factors pertaining to your business and your objectives as a businessman.
When Should I Buy Property with a Commercial Mortgage?
- Obviously, the first answer would be “When you need it.” If you have a small business and no plans of making it bigger from year to year, then why would you buy additional property? You’d be indebted for no good reason. What’s more, when you don’t need it, you don’t quite care as much for maintenance. So now there are two bad aspects: you have a debt to repay and you’re stuck with property that is derelict because you didn’t invest any effort in taking care of it.
- You can buy property when you are 100% sure you can make the repayments, and you’re not going to default on the loan. That would be a black stain on your credit score that could have been easily avoided.
- Buy property when the loan would support your plans. In other words, you should take a property loan if your company cannot be developed without it. That is intrinsically tied to the “When you need it” aspect. There has to be a strong reason for blowing a huge load of money on the property.
- Get it when you couldn’t have used your money for a more productive purpose than that of buying property. Is it something considerably better you could’ve used that money on? If yes, buying property is not that good of an idea. You shouldn’t buy things just because you afford them. Ideally, you will spend them only on what you genuinely need.
- This is a good idea when you can afford the following: maintenance, repairs, renovations (if that’s the case), all the inspection and legal fees + the monthly rates. Even though you afford to buy a particular property, do you have enough money to take care of it? This is extremely important! You should think wisely about this issue before you buy anything.
So, is a commercial mortgage good for your business? Ask yourself all the questions above. If your answers are positive and you have strong reasons to buy property, then it cannot be a bad thing. Most companies dream of extending their office space or any other type of space that’s interconnected to the said companies. On top of this, you should keep your eyes peeled for the interest rates. If your debt is growing faster than you can pay it, you’ve just bought property at a terrible, terrible price.
There are many business owners that embrace a commercial mortgage for all the wrong reasons. A load on your shoulders is worth bearing only if it serves a true, attainable objective; rental space, for example, is a good purpose.