Personal mortgages VS Corporate mortgages –what are the differences?

The similarity between personal and corporate mortgages is that they are both taken out to buy real estate properties. Even though they share these similarities, they have key differences that define them.  You cannot take a personal mortgage  for business purposes just like you cannot receive a corporate loan and use it for personal gain. Corporate mortgages are high-risk compared to personal loans; here are the key differences that separate personal mortgages from corporate mortgages

Lenders and receivers

Personal mortgages are given to individuals by banks or real estate agents while corporations are given mortgages by commercial banks. This means the representative of a personal loan is a single entity while a corporate loan is represented by a business or a company.

Requirements

While personal loans rely mainly on the income of the individual, loans given to corporations rely on multiple factors. For personal mortgage, you are required to provide credit score, income, identifications and employment information. Lenders require corporation to produce tax return documents, documents of partnership and investors, performance numbers, credit scores, assets and your company’s bank statement. The requirements for a corporate mortgage are stricter and borrowers should provide proof that there have been in business for more than three years.

Down payment

With both, a down payment is necessary, but corporate mortgages a have a fixed down payment. With corporate mortgage the lender gives you a certain amount for the real estate and you have to pay the rest as a down payment. If banks offer you 70% you will pay 30% of the money in down payment. The down payments for personal mortgages are negotiable. The lender will give you a loan depending on the amount of money you have saved up.  If you have good credit, you can easily get a mortgage worth 90% or more of the property value.

Restrictions

With a personal mortgage, you are restricted to use it on residential property alone. When you receive a mortgage, your corporate can use it to develop a new business, buy land, maintain and boost an existing business or buy a commercial property. The restrictions to a mortgage property are low since lenders are almost always sure your business will create profits one way or another.

Payment plans

An average personal mortgage has up-to a maximum of 30 year- term while most average mortgage payments can only take up to 10 years.  However, personal mortgages can be negotiated to 15 year or 40 year payment plan depending on the income of the individual. When the housing market rises, lenders can offer a payment plan of up to 60years.  Mortgage for corporate businesses are risky therefore most lenders tend to have short-payment plans.

Penalties

A personal mortgage can be paid off at any time depending on your agreement with the lender. When you fail to make the payment, the lender will use the title deed to your home as collateral. You will lose your house and down payment. Corporate loans have pre-payment penalties while personal mortgages don’t. When your corporation does not make payments on time, the lenders take some of your assets as collateral damage.