Are commercial loan rates in Arizona higher than residential?

Are you looking to buy property in Arizona? If you’re business-minded, you may be wondering whether it’s better to get a commercial loan over a traditional residential loan. 

Home to the spectacular Grand Canyon, Arizona is a great place to live and start a business. With countless unique landscapes to explore, Arizona also has well-known restaurants, abundant wildlife, archaeological sites, and a diverse range of sports to welcome new homeowners. 

In this article, we’ll break down the differences between residential and commercial mortgages and which option is better for you.

Can I use Commercial Mortgages for Residential Properties?

You can use commercial mortgages for any type of rental property. You could also use a commercial loan for a stand-alone house if you like.

But, most investors use residential mortgages for smaller properties. Why do they use residential mortgages? The primary reason is that commercial loans are pricier. Commercial loans mostly come with shorter loan terms and higher interest rates, which increases your monthly loan payments significantly.

Also, keep in mind that residential mortgages are only available for properties with 1 to 4 dwelling units. For five dwelling units and above, you’ll have to use a commercial mortgage.

Loan Repayments for Commercial Mortgage vs. Residential

Unlike residential loans, the repayment period for commercial loans typically ranges from five years to 20 years. Also, unlike residential loans, the amortization period of commercial loans is often longer than the loan terms. 

For example, a commercial loan in Arizona with a term of ten years can have an amortization period of 20 years. In this situation, the borrower would make payments for ten years of an amount based on the loan being paid off over 20 years, plus one final payment to cover any remaining balance.

Note that the length of the term and the amortization period are negotiable.

Are Commercial Mortgage Rates Higher?

Commercial mortgage interest rates in Arizona are generally higher than residential mortgages. Also, commercial mortgages usually involve fees that add to the overall cost of the mortgage, including appraisal, legal, mortgage application, loan origination, or/and survey fees. 

Some costs must be paid before the mortgage is approved or rejected, while others apply yearly.

Is Commercial Mortgage the Right Choice for You?

Using a commercial loan for office, industrial or retail space has tons of benefits, but there is much more to consider. We encourage you to talk it over with a professional who can help you decide if this type of loan is the best fit.

Wouldn’t it be great if you went from leasing to buying your own space? Contact us at Castle Rock Mortgage to help you weigh your options.


* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.