The Benefits Of Lump Sum Reductions

If you are considering arranging the likes of a commercial mortgage perhaps to purchase business premises then there are a number of things that you will need to bear in mind before deciding if the product is suitable. For instance, amongst other things, you will want to know what the interest rate is, what the options are with regard to how long you can borrow the money over, what the fees are and what security is required.

Making one or more lump sum reductions to a commercial mortgage could have a few benefits
There are a number of benefits in being able to make a lump sum reduction to a commercial mortgage

One thing that a number of business owners do not tend to ask about is whether there is the option to make lump sum reductions to the liability. So, why could such an option be of benefit to you and your business?

Well, if there is such an option the first thing to find out about it is whether you can make such reductions to your commercial mortgage without having to pay a penalty as if there is a penalty payable then you would need to work out whether it is still financially viable to make such a reduction. There are some lenders that do provide an option to make one or more lump sum reductions to the borrowing without a penalty.

A benefit of being able to do this is that you should end up paying less interest on the borrowing than you had anticipated you would have to do. This is because if the interest were calculated say on a daily basis on the amount outstanding then, having made a lump sum reduction, you would be paying interest on the lower outstanding balance on the commercial mortgage.

Having made a lump sum reduction, you may then have the option to either keep the monthly repayments at their original level or it may be possible to have the repayment figure recalculated over the remaining term. If you choose the former then this should result in you paying off the borrowing quicker than originally intended thus paying less interest back over the term of the commercial mortgage. If you select the later then this should result in your repayments reducing.

So, if you are looking to arrange a commercial mortgage, you may wish to consider if having the option to make a lump sum reduction may potentially ever be of benefit to you.

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