Commercial property loans are perceived by lenders to be more risky than residential property loans. This is largely due to the fact that commercial property has higher vacancy rates. These vacancy periods can be extensive. As a result, there are some key differences between commercial and residential property loans. These include:
Higher interest rates. In general, you can expect to pay higher interest for commercial property. This is because the risk to the lender is higher.
Lower maximum LVRs. With residential property, you may be able to borrow 90% of even 95% of the property's value. With commercial loans, lenders offer a maximum of 70% of the property's value. This means that you will need to offer a larger deposit to qualify for the loan.
Higher fees. Apart from establishment and ongoing fees, there may be other fees that add to the cost of the loan. This can include valuation fees.