Commercial Mortgage Interest Rates

Any business owner who is looking into the possibility of getting a commercial mortgage needs to learn as much as possible about commercial mortgage interest rates.

The interest rate is basically the price of borrowing money in a mortgage. The interest rate is the charge the lender adds to a mortgage in order to cover its costs and make a profit on the deal. A mortgage payment is usually composed of a portion of the mortgage principal and the interest rate.

The interest rate for commercial mortgages is usually about 1 to 3% higher than the rate for residential mortgages. The interest rate for commercial mortgages is higher because lenders take a bigger risk when they issue a commercial mortgage than when they issue a residential mortgage. There is more risk in the commercial mortgage industry because it is less structured and has fewer regulations than the residential mortgage market.

How to Locate the Commercial Mortgage Interest Rate

The commercial mortgage interest rate is posted online everyday on mortgage websites and on news sources like The Wall Street Journal. When you check out this interest rate you should make sure you’re checking commercial mortgage interest rates and not residential interest rates.

Various websites post the interest rates charged on popular kinds of commercial mortgages every day. By looking at these rates you can determine if mortgage offers you receive match the industry standard or not. Monitoring the commercial interest rates on a regular basis can show you if you are receiving a good mortgage interest rate or not.

How Commercial Interest Mortgage Rates are Reported

The interest rates on commercial mortgages can vary considerably because a wide variety of commercial mortgage products are offered. The listings on commercial mortgage websites are usually broken down by types of mortgages and industry specific mortgages.

The types of commercial mortgage available include five, ten, twenty and thirty year mortgages similar to residential mortgages. Each of these kinds of mortgage usually comes with a different interest rate. There are also floating interest rate and other special mortgages which are available not available as residential mortgages.

There are industry specific commercial mortgage interest rates for firms and individuals in certain businesses. For example there are specific mortgage products designed for specific purposes such as office buildings, motels, factories and retail stores.  Each of these products usually comes with its own industry specific interest rate.

This means that some businesses will be able to get better interest rates than other businesses. The interest rates for various industries vary because the risks that lenders take loaning to different businesses vary.

Commercial Market Mortgage Rates

One set of commercial mortgage interest rates that business owners will see listed is the commercial market mortgage rates. These rates are not the interest rates available to mortgage holders but the interest rates that mortgage providers get when they borrow money to underwrite mortgages.

These rates determine the interest rates that businesses will pay on commercial mortgages because they are the market rates for mortgage interest. The interest rate the mortgage holder is usually about a percentage higher than commercial market rates because the lender needs to make a profit on the deal.

The standard mortgage interest rates are the prime which is based on the Federal Reserve’s price for money, the LIBOR (London Interbank  Offered Rate) which is the rate at which commercial loan money is trading at in London and the five and ten year treasury notes which are based what traders are paying for traders. Monitoring these rates can give you a rough idea of what you might pay for a mortgage.