Question:

Is commercial mortgage insurance required?

Answer:

Most often, commercial mortgage insurance is not required. Rather, commercial mortgage lenders will require that around 10% of the commercial project cost in cash or approved securities is held under the name of the lender until the commercial project reaches a pre-approved stage or is completed.

Commercial loans are not extended via rigid borrowers' credit history and income examination; rather, they are made upon evaluation of the commercial project cash generating ability. Even though commercial mortgage insurance most often is not required, certain commercial insurance policies are necessary to protect the owner in many cases.

Recommended Insurance Coverage for Commercial Mortgage Properties

  • Property Liability Insurance

    It is recommended that you purchase liability insurance for your commercial properties just in case someone suffers an accident or loss on your premises and decides to sue.

    Also, It is possible to take title of the commercial property in your own name, but it is highly recommended the title goes to an LLC (limited liability company), or a corporation. Thus, your personal liability and assets will be much better protected.

  • Title Insurance

    Title insurance coverage insures the owner of the commercial property against past title defects. Sometimes a borrower may decide to pursue a commercial mortgage property purchase even if title discrepancies are visible. Legal help is essential to properly evaluate the risk.

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