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Business Definition for: commercial mortgage
Dictionary of Banking Terms
commercial mortgage

loan secured by commercial real estate, usually with a 20- to 40-year term. Commercial mortgages differ in many ways from residential mortgage loans. These are highly customized financings and are usually pegged to a base rate such as the bank prime rate , and are sometimes made at fixed rates. Rates and payment terms are negotiated in each loan by the borrower and the lender. Commercial mortgages have commitment fees and can be quite profitable for mortgage lenders, although there is some default risk. Commercial mortgage financing is frequently arranged through multilender syndicates or loan participations arranged by a lead bank.

See also zero-coupon mortgage , interest-only loan
Related Terms:
zero-coupon mortgage

long-term commercial mortgage that defers all payments of principal and interest until maturity. The loan is structured as an accrual note; interest due is rolled into the outstanding principal. At maturity, the borrower must either pay off the note or refinance at current interest rates. The lender arranging financing gets a discounted internal rate of return; the borrower can finance a commercial project with a smaller cash flow, on the expectation that appreciation of the property value over the life of the loan is sufficient to pay off the loan.

interest-only loan

form of loan where the only current obligation is interest and where repayment of principal is deferred.

Referring Terms:
income property mortgage
wholesale banking
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