If you are well informed of happenings in the mortgage and housing market, then you would realize that Fannie Mae along with Bank of America have started a program where large pile of foreclosed homes are auctioned to individual as well as corporate investors who would like to take ownership of these homes in order to rent them out to the public.
Undertaking such a venture will require that the investor has his or her hand on a large amount of money. But what if this money is not readily available to the potential investor who wants to undertake this all important project that has the potential of greatly improving the fortunes of the housing market?
Then, there will be the need for such an investor to consider going in for a commercial loan. The most current opportunity available to potential investors is the decision by Bank of America to auction about 500 of its foreclosed homes.
Interested investors have up to the month of May to submit bids to this effect. This has the potential of causing people who might be in need of commercial loans, in order to take advantage of this lucrative opportunity, to rush through the process of obtaining a commercial loan.
Due to the fact that commercial loans are obtained for the purposes of running a business venture, they are mostly obtained by borrowers at a high interest rate. The high interest rate on commercial loans also seeks to cater for the fact that government backed institutions like Fannie Mae and Freddie Mac which guarantee most home loans in the country do not offer government backing to commercial loans. For this reason, anytime such mortgages default it is the mortgage lender that bares the full effect.
Commercial loans have a stricter repayment schedule than residential mortgages. Though the loan may carry a 30 year lifespan, the financial institution that made it possible for the borrower to obtain such a huge amount of money will require the borrower to repay the loan before the time stated on the loan agreement form.
The repayment plan is normally divided into two stages. In the first, the borrower is allowed to make monthly installments of the principal and interest on the loan for a specified period of time. Then, in the second instance, the borrower would have to settle the rest of the loan in one lump sum.
For this reason, it is always essential for the borrower to thoroughly assess the business venture he or she is going to embark upon to find out if the venture has the potential of generating enough money that can help him or her to settle the loan. If this is not done, the borrower can very easily put him or herself in a very serious financial predicament.