Commercial Purchase

A commercial mortgage is a loan made using commercial real estate as collateral to secure repayment. These types of mortgages are typically taken on by businesses instead of individual borrowers. The borrower may be a partnership, incorporated business, or limited liability company, so assessment of the creditworthiness of the business can be more complicated than is the case with residential mortgages. There are many types of commercial real estate such as: multifamily buildings, office buildings, hotels, self-storage units, restaurants, gas stations, and warehouses, among others.

Some commercial mortgages are nonrecourse, that is, that in the event of default, the creditor can seize the collateral, but has no further claim against the borrower for any remaining deficiency. The general reason for this is twofold: many laws significantly prevent the creditor from going after the borrower for any deficiency, and mortgages structured for sale as bonds give a higher priority to constantly receiving some sort of income and therefore require a clause which allows the lender to take the property immediately, regardless of bankruptcy proceedings that the borrower might be going through.

Frequently, the mortgage is supplemented by a general obligation of the borrower or a personal guarantee from the owner(s), which makes the debt payable in full even if foreclosure on the mortgaged collateral does not satisfy the outstanding balance.