For anyone to upgrade their business, they will require some sort of finance to help them with it. Usually businesses that need to buy property or office buildings to grow do not have all the capital required to do so. This is why most of them get money for these upgrades from commercial mortgage lenders.
There are many types of commercial mortgage loans that are offered these days, making it easier for you to find a loan type that will suit your requirements best. But as of now we are going to go over interest only mortgage loans.
An interest only mortgage, as the name suggests, is a loan type that allows a borrower to make payments that consists only of the interest. The borrower is given the option to pay only interest for a certain period of time. Usually the interest only period is for the first few years, but borrowers are allowed to pay back parts of the principal if they have the money to do so.
Interest only mortgage loans are not suitable for every kind of borrower. It should be only used if you have a proper reason to pay the interest at first. This is suitable for people who have incomes that are not stable. When they do not have enough money to pay principal and interest, they have the option of paying just the interest. When they do get enough money they can pay back as much principal as they like.
In the event that you get an excess in income, and want to use that money to generate more wealth, then this is a good loan type for you. You can use the excess cash to make an investment and generate more money instead of using it for principal repayment. But while doing this you must make sure that your returns on the investment exceed the interest rate.
If your business is trying to rapidly increase the amount of property they own in order to increase capital, interest only mortgage loans will allow you to minimize the initial payment so that you have the necessary funds to buy the extra property.
As you have read, Interest Only Mortgage loans are not to be taken if you do not have the need to. You must layout a plan of payment before taking this type of loan in order to minimize the risk. This type of loan has many benefits and will help you do a lot more with your business if you know how to use it.
By Andrew Watson