A Commercial Mortgage Contract is a contract which is made in order to grant a loan to a person for acquiring, refinancing or redeveloping a commercial property. This loan is generally granted against a commercial property such as a shopping centre, apartment complex, office building and industrial warehouse. Many a times, the same property for which the loan is being demanded, is kept as a security by the bank. It’s a legal document that gives the lender authority to capture and sell the secured property in order to pay off the loan if borrower fails to abide by the terms stipulated in the contract or does not pay back on time.
The contract is structured in such a way that it meets the needs of both, borrower and lender. The contract contains details about the loan amount (also referred as “loan proceeds”), interest rate, term, i.e., time period (also referred as “maturity”), amortization schedule and prepayment flexibility.
A proper due diligence process is carried out before the closure of the contract. A thorough underwriting process is also conducted that includes financial review of the owner’s or sponsor’s property, review of the property for which loan is being demanded, and review of all the third-party reports that have been submitted to the bank.
Sample Commercial Mortgage Contract: