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It’s been a long time coming, but now you can use your residential property for business financing without being penalized with fees.
Typically, in the past, if you were to use a residential property for “commercial purposes,” the bank would say fine: even though it’s residential, the purpose is commercial financing, so we’ll apply a “commercial” rate which has generally been a rate higher than the typical rate on your mortgage loan.
This started to change about 4-5 months ago when ING made its mortgage simplification rate for use in financing commercial property. So if 40% of the purchase price was from residential financing and 60% was from commercial financing rates, it was much more competitive. The loan term of 30 years with 5 years of interest 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 dominant institution has allowed its best residential rate (6.47% as of 06/15/10) to be used to purchase commercial property. It is currently about 0.9% below the standard variable rate of major banks. Then all of a sudden, using your residential property for business financing became much more attractive.
So if you’re financing a commercial property and have some residential equity, there’s never been a better time to consider your options. Both from the perspective of a better rate, as well as longer and hassle-free interest terms, as well as no annual reviews, etc., it’s worth looking into.