It’s been a long time coming, but now you can use your residential property for commercial financing without being penalized for fees.
Generally, in the past, if you used a residential property for “commercial purposes” the bank would say well: even if it is residential, the purpose is commercial financing, so we will apply a “commercial” rate which has generally been a rate higher than the typical home loan rate.
This started to change about 4-5 months ago with ING making its mortgage simplification fee for use in financing commercial properties. So if 40% of the purchase price was residential financing and 60% was commercial financing rates, it was much more competitive. The 30-year loan term with interest of only 5 years is also more attractive with this type of loan, because the average repayments are lower, however, if you want to pay more, you can.
Then, in the last month, another conventional institution allowed its best residential rate (6.47% as of 06/15/10) to be used to buy commercial property. Currently, it is approximately 0.9% below the standard variable rate of the main banks. Then all of a sudden, using your residential property for commercial financing became a lot more attractive.
So if you are financing commercial property and have some residential equity, there has never been a better time to consider your options. Both from a better rate perspective and longer, hassle-free interest terms, as well as no annual reviews, etc., it’s worth looking into.