Commercial property loan in Sydney

Commercial lending is usually written to a lower loan-to-value ratio than residential, so expect to contribute more. Owner-occupied purchases commonly sit around 65% to 80% LVR depending on the property type and the strength of the business, meaning a deposit of roughly 20% to 35% plus costs. Specialised premises attract tighter LVRs than standard offices, warehouses or retail. Using equity in an existing property can reduce or replace the cash deposit.

Plan for six to twelve weeks from application to settlement in most cases. The steps that take time are the full financial assessment, a formal valuation of the property, legal documentation and any conditions the lender imposes before funding. Purchases with tight contract dates need the finance clause negotiated realistically at the outset. Refinances of an existing loan can be quicker where the property and the borrower are straightforward.

Yes. Interest-only periods of one to five years are common on commercial property loans, particularly for investors who want to maximise cash flow and deductions, and some lenders will extend them on review. During the interest-only period you pay only the interest, so repayments are lower but the principal does not reduce. Owner-occupiers usually move to principal-and-interest so the debt is paid down over the term. Lenders assess an interest-only loan on the higher principal-and-interest repayment that follows, so the business or lease income still needs to support it.

An owner-occupied commercial loan finances premises your own business will trade from, and lenders assess it largely on the strength of that business. An investment commercial loan finances a property leased to someone else, and lenders assess it on the lease income, the tenant and the lease term remaining. Owner-occupied loans often allow higher borrowing and can be structured through the trading entity, while investment loans lean on the quality of the lease. Both can include a residential-security top-up where more borrowing is needed.

Commercial property rates are usually a little higher than home loan rates and vary with the lender, the property type, the loan-to-value ratio and how the loan is documented. Full-doc loans with strong financials and a standard property attract the sharpest pricing; low-doc or lease-doc loans and specialised assets are priced higher. Loans can be fixed, variable or split, and interest-only periods are common for investors. Lyft Financial compares bank and non-bank lenders so you see the rate, fees and repayment side by side before you commit.

A lease-doc loan is assessed on the rental income from a commercial lease rather than on the borrower’s full financial statements. Lenders check that the rent covers the interest by an agreed margin and that the lease term, tenant and property are sound. It suits investors whose tax returns do not reflect their position, or who want a faster approval, and it usually comes with a lower maximum loan-to-value ratio and a slightly higher rate than a full-doc loan.