Commercial Mortgage and Commercial Hire Purchase Terms

In commercial mortgage a commercial real estate is used as collateral to secure repayment. Though it is similar to a residential mortgage, here the collateral is a commercial building such as office, industrial building, medical buildings, shopping malls, instead of a residential property. The multfamily housing buildings also fall under commercial property. However, commercial mortgage is generally taken on by incorporated business, or limited company instead of individual borrowers.


The common applications loans include acquiring land or commercial properties or refinancing the already existing debt. Common commercial properties are generally mortgaged for office, retail,  amp; industrial purposes.Commercial Mortage is generally made with less than 10 years terms but can be much longer than this also.


A commercial real estate can be taken on for mortgage for a variety of purposes such as:


For purchasing the premises of the business


To extend the existing premises


For residential and commercial investment


In order to develop the property in other manners


Commercial loan broker acts as the intermediary between the borrowing business and the commercial lender. The broker is basically a middle man having information about all the lending criteria of the funding sources. The broker gets paid in commission for each deal made.


As the markets for mortgages have grown in recent times, the role of the mortgage broker has become very pivotal.


On the other hand in Commercial Hire Purchase (CHP) the customer hires a financial product from the financier. The product is generally hired over a set period of time for a fixed monthly repayment charge.In this case the customer generally hires a vehicle for a fixed period of time.


However, under (CHP), the financier agrees for purchasing the car on behalf of the customer, for hiring it back over afixed time period.


At this situation the customer is not the owner of the car. However, when the contract term gets over the total price of the vehicle including the interest charges have to be paid in full. After the full payment, the customer gets the ownership of the car.


Commercial Hire Purchase terms:


Time period ranges from two to five years.


The residual value is according to the contract and it is made on fixed interset rate


The monthly repayments are fixed for CHP and deposit (either cash or trade-in) can be used


If the vehicle is used for business purposes, a tax deduction is available


GST charges is not applicable on the residual payment


Commercial Hire Purchase (CHP) is helpful for organisations, partnerships and sole traders account ing for GST on Accruals basis.They can claim the GST to their next Business Activity Statement (BAS). When the hirer is registered for GST, Input Tax Credits can be applicable. However, individuals using vehicle for business purpose can also opt for CHP.Here the hirer is eligible to claim depreciation up to the limit .As a tax deduction method, the hirer can also claim the interest charges on the contract.