Mortgage for commercial real estate: features and conditions of provision

Who can apply?

Many people can apply for a mortgage on non-residential real estate; they can be roughly divided into two groups:

• individuals - citizens of the country who want to buy, for example, a garage, parking lot or shed in the territory of the yard in which they live. In this case, non-residential real estate is purchased for personal needs or for rent (passive income);
• individual entrepreneurs or legal entities. They purchase commercial real estate solely for the purpose of generating income and using it in their work activities. This could be a cafe or restaurant, a production workshop or a warehouse - everything that makes it possible to work and create goods or services.

Depending on this, the procedure for issuing a loan and the subsequent actions of the potential borrower and the bank vary.

What is important for a potential borrower – an individual – to know?

It should be taken into account that for individuals wishing to purchase non-residential real estate using a mortgage loan, the conditions will not be as favorable as in the case of residential real estate. First of all, you need to remember the following nuances:

• any real estate purchased under the terms of a mortgage automatically becomes collateral;
• In this case, maternity capital cannot be attracted;
• no housing subsidies apply in this situation;
• You will not be able to return taxes on such a mortgage.

So, before taking out a mortgage on such a property, it is recommended to consult with employees of a financial institution to find out how profitable this option will be.

Otherwise, all conditions will be close to a regular mortgage:

• the minimum loan threshold should not be less than 45 thousand rubles;
• the down payment is 15% of the value of the property;
• loan rate from 8.5%;
• The maximum repayment period for such a loan is 30 years.

Features of provision

The annual rate on commercial mortgages ranges from 9–20%.
Without collateral or a down payment, it is almost impossible to get a loan. Article navigation

• Individuals and legal entities in mortgage relations
• How and under what conditions can you take out a business mortgage?
• Procedure for concluding a contract
• Is it possible to get a mortgage for a business without a down payment?
• Requirements for the borrower
• Banks providing commercial mortgages
• Commercial Mortgage Calculator
• conclusions

Real estate usually constitutes the most valuable part of a company's fixed assets. Accordingly, their acquisition requires large expenses, and often the attraction of borrowed funds. The article talks about how to get a loan to purchase commercial real estate in 2021.

Requirements for a creditor - a legal entity

As is the case with other types of mortgages, an individual who intends to take out a loan on non-residential real estate secured by this very real estate must:

• Prove that he is ready to bear his obligations. For individuals, this is confirmation of a decent salary level (the generally accepted rule is that no more than 40% of the total family income should be spent on loan repayment). For legal entities, the requirement is different - it is necessary to provide data on turnover and a profit declaration.
• If, in the case of apartments, visiting the property is not practiced, then in the case of non-residential real estate, the bank in most cases will send its employee there to obtain first-hand information about the real condition of the property.
• Make sure that the non-residential premises are not burdened with other financial obligations. The main feature of a mortgage is that the purchased object itself becomes collateral and a guarantee of repayment of funds, and therefore must be free from other obligations.
• Be prepared for the fact that without your own down payment, an individual is unlikely to receive such a loan. A legal entity, especially if it is serviced by the bank where it applied for a mortgage, has a better chance, but it will still need its own funds.
• Keep in mind that interest on this type of mortgage may be higher than in the case of an apartment. This always happens when the bank fears for the liquidity of the object - in this case, its financial institution risks automatically increase, and the bank can only compensate for them with higher interest rates.

Otherwise, everything is as usual: the purchased object becomes collateral and is owned by the banking institution until the creditor pays off all its obligations. The term for which the mortgage is issued can be up to 30 years, but a more realistic option is 15-20 years. Sberbank, for example, has a separate program dedicated to mortgages of non-residential real estate, which is called “Business Real Estate”. Its conditions for organizations are quite strict:

• term – up to 120 months (10 years);
• amount – from 500 thousand rubles;
• interest rate – from 11% (compared to other types of mortgages, its level remains quite high);
• provided to individual entrepreneurs and small businesses whose annual revenue does not exceed 400 million rubles.

Is it possible to get a mortgage for a business without a down payment?

One of the significant advantages of a mortgage is its similarity to leasing, that is, a lease, at the end of which the asset becomes the property of the payer. However, there is a difference: most often a down payment of a fifth of the property price or more is required.

This circumstance hinders many credit buyers. Large firms are forced to withdraw funds from circulation, while small enterprises and individual entrepreneurs may not have such money at all.

There are several banks in Russia that provide mortgage loans without a down payment under existing programs. Their terms provide for a wide range of contract parameters:

• amount – 150 thousand rubles. and more;
• repayment period – from 3 to 10 years;
• annual rate – 9–17.45%;
• bank commission for registration – 0–1.5%;
• opening a current account at a given financial institution (not always);
• collateral or guarantee (often).

To facilitate control, some banks provide mortgage loans for the acquisition of properties located geographically close.

Requirements for the borrower

In order not to make a down payment, a bank client most often needs to meet the following set of criteria:

• The company (IP) is registered and conducts business activities in Russia.
• The company has been operating on the market for at least six months (preferably a year).
• The age of the person authorized to represent the credited organization (manager, owner, individual entrepreneur) is in the “golden” range of 20–60 years.
• Positive credit history. Its absence is better than the presence of a bad one, but not by much.
• For individual entrepreneurs, many banks have restrictions on the amount of annual financial turnover. It is clear that it should not be lower than 400 thousand rubles - otherwise the individual entrepreneur may not be able to meet the monthly payments. But there is an upper limit - one billion, and it sometimes raises questions. This limit is explained by the fact that with such revenue, doubts may arise about the financial stability, and sometimes even the legality of the activities of a “modest private businessman.”
• The minimum staffing level is one hundred employees. This condition is not imposed by all banks and not always. The number of employees does not necessarily reflect the health of a firm's finances.

The general rule of lending is the excess of the probable sale price of the collateral over the amount of the loan issued plus interest on it. Since the purchased property itself most often serves as material security, the lender’s natural requirement is to provide additional guarantees to compensate for the lack of a down payment.

Information about the conditions of credit institutions offering mortgages without a down payment is formulated somewhat vaguely.

For example, Sberbank, Transcapitalbank, Surgutneftegazbank, FC Otkritie and some others seem to offer a similar program, but are ready to provide a loan of only 70–80% of the estimated value of the property. Plus a mandatory guarantee.

VTB can provide a commercial mortgage in full with a 15% advance at 15% per annum with a deferment of up to six months, but with mandatory additional collateral. The motivation is still the same - the desire to protect against non-payment.

Requirements for real estate objects

Such an object is subject to a number of requirements that must be met in order to successfully resolve your issue with a financial institution and obtain a mortgage.

Firstly, the premises must be non-residential not only de facto, but also de jure. Even if at one time an apartment on the first floor of a multi-storey building was converted into a store, but the relevant documents were never drawn up, a financial institution will not perceive this object as non-residential. Therefore, you can first take out a mortgage as for an apartment (that is, as a residential property), and then deal with converting the apartment into a store.

But here a consultation with an experienced lawyer is required, who must answer the question about the possibility of such a transition from a residential to a non-residential state of an object acting as collateral. However, given the level of bureaucratization of many processes in our country, we recommend that you deal with the re-registration of documents in advance - sometimes even the most experienced lawyers cannot clearly say whether the presence of encumbrances will be a reason for refusing to classify the premises as non-residential.

What difficulties might arise?

Indeed, in the process of obtaining a mortgage for non-residential premises, some snags may arise, however, armed with methods for resolving them, you can avoid such problems:

• Inadequate assessment of the premises. Sometimes appraisal companies deliberately underestimate the value of an object (especially if this company is a structural part of a banking institution, and this is not so rare). The assessment affects the possible size of the loan, as well as the conditions for its processing. It is better if it is carried out by an independent company, then there will be a much greater chance that the assessment results will coincide with the purchase price of the property.
• With this type of mortgage, you cannot rely on co-borrowers or guarantors. In the case of apartments, this helps reduce banking risks, while correspondingly reducing bank interest, but in the case of non-residential real estate, the bank does not agree to this.
• Many Russian citizens know that the country has a program for allocating maternity capital and the possibility of using it for global needs - from paying for a child’s education in the future, when he grows up, to purchasing real estate. So, if we are talking about residential real estate, such use of funds received from the country is possible, but this does not apply to non-residential real estate.

Commercial Mortgage Calculator

Almost all banks on their electronic resources provide users with the opportunity to independently make an approximate calculation of a business mortgage online, using software calculators. These virtual tools do not provide a complete and accurate picture of the terms of the loan, which is usually confirmed by the offer to discuss them personally with the manager.

In addition, the calculators have a universal focus and are not intended to calculate the parameters of a commercial mortgage loan specifically. In order to use them, you must enter the interest rate yourself. As a rule, a businessman who has not yet contacted the bank does not know it for sure. The amounts of various additional commissions and fees are also unknown to him.

However, based on the indicators indicated above and published on banking websites, you can still roughly “estimate” the terms of a mortgage loan by using a calculator.

After entering all the data and clicking the “Calculate” button, the potential client will receive an approximate idea of ​​how much he will pay per month until the end of the loan period, and what the total overpayment will be.

What type of mortgage for non-residential real estate is better?

If, for example, a resident of Russia wants to buy a parking lot for his own needs or to rent out, then he has only one option - to get a mortgage to an individual. If he is an individual entrepreneur or the head of a commercial company, and in order to develop his business it is necessary to purchase non-residential real estate, then there are two options.

The first is registration for the organization. In this case, important indicators will be gross turnover, gross profit and other financial performance indicators presented in the annual reports.

The second is registration of the director or owner as an individual. In this situation, important criteria are his salary and the presence of other assets (house, car) and liabilities (other loan obligations).

There is no need to lie: if a company has problems with money, then a bank audit of the director will definitely reveal them. As well as vice versa: the director’s huge amount of credit real estate secured by the company’s property will also not add points. It is worth choosing one or another scheme based on the banking conditions that they are ready to provide for a mortgage to an individual or legal entity. If the loan term is longer and the interest is lower for legal entities, it is worth taking out a mortgage on non-residential real estate for an organization. If on the contrary, then to an individual.

Banks providing commercial mortgages

Mortgage conditions in all banks, as a rule, are common for company owners and individual entrepreneurs. When choosing a lender, the client must evaluate all offers and choose the most acceptable one.

The most profitable options are summarized in a table.

The most profitable business mortgage is available to clients who can convincingly prove their solvency and have more than one year of business experience.