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How a Consumer Mortgage Loan Differs from a Commercial Real Estate Loan

Many young and eager business owners apply for a commercial real estate loan with a misconception that the process is similar to a consumer mortgage loan. But there are notable differences between the mortgage real estate loan process and the consumer commercial loan process you should be aware of before you apply for a loan to support your growing business.

Let's first clear up the biggest difference between consumer mortgages and commercial real estate loans (business): the uses. Consumer mortgages are a type of loan from a bank or lender to help you finance the purchase of a home. Commercial real estate loans, on the other hand, lend business owners a sum of money to invest in their business. Business loans can be used for a wide variety of business-related expenses, from new equipment to hiring and beyond. Let's talk about a few of the other differences between mortgage and commercial loans:


Interest rates for consumer mortgages are typically lower than commercial real estate loans. A business loan will likely carry a higher interest rate, depending on the amount borrowed and term, among other factors.


Consumer mortgages are typically longer term, but business loans are generally much shorter. Business loans often range from 3 to 10 years, with 10 year loans being on the rare side.


The collateral is basically "insurance" for the lender that you will pay back your loan. For a consumer mortgage, your collateral is simply your home, meaning you will lose your home if you aren't able to pay back your loan. For a business loan, the collateral will depend on your lender and your qualifications but can be defined as "anything of value."

Finally, the Process:

In going through the consumer mortgage process, you may generally:

  • Get prequalified for a mortgage*
  • Apply for a mortgage
  • Order a home inspection
  • Purchase homeowner's insurance
  • Lock in your rate no later than 10 days prior to your closing date*
  • Review your documents
  • Arrange for down payment/ closing costs*
  • Unlock your new home

The commercial real estate loan process is a bit more involved and requires extra documentation, you may:

  • Get prequalified for a loan*
  • Apply for a loan along with providing collateral which could include stocks, bonds, and real estate*
  • Receive letter of intent of term sheet with all pertinent loan information to sign*
  • Wait for the loan to be approved during which additional documentation may be required
  • The loan application package may be resubmitted to the loan committee for final approval
  • Sign the finalized loan documents if and when the loan is approved.

While these are the overarching differences between the consumer mortgage and commercial real estate loan processes, it is not an exhaustive list. Our commercial lenders have over 100 years of collective experience and leverage their know-how to make sure their customers get the right loan for their needs. Citizens Bank Commercial Lenders are happy to educate you on the ways in which personal and commercial loans operate. Stop by and see us today!


*Check with your lender to see if this is offered or is an option and what the requirements are.

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