Commercial Mortgage

Commercial Mortgage — A commercial mortgage finances the purchase or refinance of income-producing or business-use property. Lenders underwrite these loans primarily on the property's net operating income and debt-service coverage ratio rather than the borrower's personal income, though personal guarantees are often required for smaller deals.

Commercial mortgage notes trade on the secondary market much like residential notes, though due diligence differs substantially. Investors evaluating a commercial note must analyze lease rolls, tenant creditworthiness, property condition, and local market vacancy rates. Default resolution can also be more complex, as commercial foreclosure timelines and borrower protections vary widely by state and property type.