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  • Writer's pictureColin Dubel

Differences Between Residential Mortgages & Commercial Mortgages

The primary differences between a residential mortgage and a commercial mortgage are as follows:

  1. Purpose: A residential mortgage is used to finance the purchase of a primary residence, while a commercial mortgage is used to finance the purchase of a commercial property, such as an office building, retail space, or apartment complex.

  2. Collateral: The collateral for a residential mortgage is typically the residential property being purchased, while the collateral for a commercial mortgage is the commercial property being purchased.

  3. Loan Size: Commercial mortgages are typically larger than residential mortgages, reflecting the larger cost of commercial properties.

  4. Interest Rates: Commercial mortgage interest rates are typically higher than residential mortgage interest rates because commercial mortgages carry a higher risk due to the complexity of the properties and the potential for higher vacancy rates.

  5. Repayment Terms: Residential mortgages are often repaid over a period of 15 to 30 years, while commercial mortgages may have shorter repayment terms of 5 to 20 years, depending on the type of commercial property and the borrower's creditworthiness.

  6. Underwriting: Underwriting for residential mortgages focuses on the borrower's ability to repay the loan, while underwriting for commercial mortgages takes into account the property's cash flow, marketability, and potential for future growth.

  7. Regulations: There are different regulations that apply to residential mortgages and commercial mortgages, with commercial mortgages being subject to more regulatory oversight, including requirements for environmental and zoning compliance.


If you have any questions about this article or would like to discuss a scenario of your own with our team, please feel free to contact Colin Dubel at colin@harborwestcommercial.com or 949-735-6415.

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