What is Commercial Mortgage?
Кредит, обеспеченный коммерческой недвижимостью: офисами, ритейлом, складами или гостиницами,, с иными условиями и критериями андеррайтинга по сравнению с жилой ипотекой.
Description
A commercial mortgage is a loan used to purchase or refinance commercial property, including offices, retail spaces, industrial buildings, or hotels. Unlike residential mortgages that are underwritten primarily on the borrower's income, commercial mortgages focus on the property's income-generating potential (the DSCR, or debt service coverage ratio) and the borrower's business financials.
LTV: typically 60-75% vs 80-85% for residential
Term: shorter terms, often 5-15 years with balloon payments
Rate: generally higher interest rates than residential
Underwriting: focuses on property cash flow (DSCR ≥ 1.25x) as well as borrower financials
UAE banks offer commercial mortgages for income-producing commercial properties. LTV limits are typically 60-70% for commercial versus 75-80% for residential. Interest rates are higher, and tenors shorter. Some banks require the commercial property to be tenanted with minimum lease periods as a lending condition.
How to interpret
Commercial mortgages are underwritten on the property's income, not just the borrower's personal financials. This means a commercial mortgage application requires detailed rental income documentation, lease agreements, and a DSCR analysis showing the property generates enough income to cover debt service with a margin of safety.
The shorter terms and balloon payment structures common in commercial mortgages require careful planning. When the balloon payment falls due, you need either the cash to repay, a refinancing facility, or a sale ready to execute. Underestimating refinancing risk at maturity is a common mistake in commercial real estate.
Контекст рынка Дубая
UAE banks offer commercial mortgages at 60 to 70 percent LTV with higher rates than residential products. Interest rates are typically EIBOR-linked with higher margins than residential mortgages, reflecting the greater complexity and risk of commercial collateral. Some banks require the commercial property to be tenanted with minimum lease periods remaining as a lending condition.
Dubai's commercial real estate market has tightened notably, with Grade A office vacancy below 10 percent in prime areas. This improved occupancy has supported commercial mortgage lending, as banks are more comfortable lending against fully occupied assets with strong covenant tenants. Vacant commercial properties are notably harder to finance.
Frequently asked questions
A loan secured by commercial property, including offices, retail, warehouses, or hotels, with different terms and underwriting criteria than residential mortgages.
A commercial mortgage is a loan used to purchase or refinance commercial property, including offices, retail spaces, industrial buildings, or hotels. Unlike residential mortgages that are underwritten primarily on the borrower's income, commercial mortgages focus on the property's income-generating potential (the DSCR, or debt service coverage ratio) and the borrower's business financials.
Commercial mortgages are underwritten on the property's income, not just the borrower's personal financials. This means a commercial mortgage application requires detailed rental income documentation, lease agreements, and a DSCR analysis showing the property generates enough income to cover debt service with a margin of safety.
UAE banks offer commercial mortgages at 60 to 70 percent LTV with higher rates than residential products. Interest rates are typically EIBOR-linked with higher margins than residential mortgages, reflecting the greater complexity and risk of commercial collateral.
Oliva feeds Commercial Mortgage into a proprietary 6-dimension score that rates eparticularly Dubai project on Financial Value, Market Dynamics, Location, Developer Trust, Risk, Macro Context, and Liquidity. This keeps comparisons consistent across hundreds of listings.
Interest rates are higher, and tenors shorter. Some banks require the commercial property to be tenanted with minimum lease periods as a lending condition.
Stop reading theory. See commercial mortgage on real Dubai projects.
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This content is for educational purposes only and does not constitute investment, financial, legal, or tax advice. Yields, returns, and market data referenced are historical or estimated and are not guaranteed. Capital is at risk. Seek independent professional advice before making investment decisions. Oliva is a licensed Dubai real estate advisor (DLD Broker Card: 92025, RERA BRN: 1573501). Read our Key Risks Disclosure and Disclaimer.