Permanent Mortgage Financing | Small Business Loan Central

When you add on to your business or build your business on your own, you might need to get a mortgage - Either on your owned residential property, or on a business location. Unless you already have the funding for the expansion project, you will have to finance it and after the construction is completed, you will have to transfer the remaining balance on the loan over to a financing product called permanent mortgage financing.

What is a Permanent Mortgage?

A permanent mortgage is a created for an extended period of years. This time frame is generally longer than ten years. The process for getting a loan like this is typically straightforward. Like any loan, the lender must have an application that is filled out which offers to transfer the title to the borrower once the loan is paid off. The advantage is that the builder has the ability to take their construction loan and transfer the remaining balance to one of these permanent mortgages.

Advantages of a Permanent Mortgage Loan

The advantages of a permanent loan are the fact that a builder can get a building loan and then transfer the balance over to a permanent loan once the building is finished, yet there is only one closing fee. This saves money that can be used to make the building better. It is often used when a business has land that they either wish to improve or land that they want to build on. It can also be used when the business owner wishes to add on to their existing construction. It allows money to be saved on the entire deal.

Details and Restrictions

Sometimes, a lender may place restrictions on the loan. When this happens, it must be considered carefully by the borrower. There may be a limit to how much can be borrowed for example, when the building that is listed as collateral, only has a certain value. In that case, there is a value that is placed on the collateral. This is as much as the borrower can borrow. This can be to the advantage to the borrower if they only borrow a certain amount of money for the new construction. The remainder of the money borrowed can be either transfer to a permanent mortgage or it may be taken out as cash and used for other business use.

There may be restrictions on the time that is allowed for the construction. Once that date is reached, the time of maturation is reached and may not be extended in some cases. You should consult the lender for their requirements on this point.

While some banks do provide construction loans, permanent mortgage financing for anything over $1 million may be refused by them. Even for loan requests under $1 million, they may ask for a formal letter of commitment from a lender that guarantees the permanent mortgage take-out

Requirements and Steps

There are certain requirements and steps that must be taken in order to fulfill the loan. At the time that the money is dispersed to the borrower, the following must be sent to the lender.

• A copy of the building permit
• Proof of insurance on the building or land
• Any inspections that have been required for the loan
• Any and all titles involved in the construction or land
• Any waivers that have been made on the building or land

Additionally, at the time of the maturation, the following must be sent to the lender.

• The draw request form
• Completion notice
• Certificate of occupancy
• The final inspection report
• The title continuation
• Lien waivers
• Homeowner’s insurance or business insurance