Whether you’re an aspiring chef harbouring dreams of opening your own heritage building restaurant, or an entrepreneur looking to acquire a luxury office suite in the heart of the CBD, a commercial property loan is often going to be your ticket to making this a reality.
Commercial property loans, as you may already know, can be used to finance factories, retail lots, and other commercial real estate. Unfortunately, the process is often gruelling—and worse, riddled with charges that may catch the unsuspecting off guard.
In this article, we’ll explore some of the costs and fees involved in a Singapore commercial property loan to help you prepare for your commercial property loan.
Commercial property loan lenders usually charge between 0.5% - 2.5% of the total approved financing amount for processing fees. This cost covers the administrative cost of processing your loan application. Some lenders include evaluation fees within this amount, whilst others charge it separately. Processing fees will be deducted from your total property loan upon disbursement.
Legal fees will be charged as a separate payment that has to be made to the lawyers who are conveyancing your property–which essentially means changing the ownership of the property you are buying. Depending on the type of commercial property, you will be looking at an additional fee ranging between $2000 to $5000, to be paid directly to the legal firm providing the service.
Some loan providers will absorb or subsidise your legal fees, especially for commercial properties that are of higher value. Taking advantage of such offers from your lender can help you save on your legal costs and bring down your overall cost of borrowing.
Valuation fees are used by banks and other lenders to determine the value of a piece of property being used as collateral. Typically, an independent licensed valuer is employed by the loan provider to provide this information. They charge anywhere between $200 to $500 depending on the type of commercial property.
Some lenders absorb this charge as part of the processing fees, while others charge you separately for it.
Whilst the fees mentioned above are to be paid during the commercial property loan application process, a late payment fee is one that can potentially be charged during the repayment process, levied on you, the borrower, should you miss a monthly loan repayment.
Usually, it is calculated as a percentage on top of your prevailing interest rate, about 5% extra as a penalty for delayed payments. Therefore, if your current commercial property loan is about 4% per month, you may need to pay 9% on the monthly repayment you missed.
These following costs are not directly charged to you during the commercial loan application or repayment process. However, they are additional financial expenses you have to bear as part of the process for purchasing a commercial property in Singapore.
Stamp Duties are a type of tax paid to the government as part of the purchase of immovable properties, including commercial and industrial buildings. The amount of stamp duty you will have to pay depends on the price of the asset you want to purchase. The more expensive the property, the more tax you will have to pay. Here is a summary of the stamp duty costs:
All owners of commercial and industrial properties are required to pay a flat fee of 10% of the annual value of their property to the government as a property tax. The annual value of your commercial property is the estimate of annual rental income that can be derived from the said unit. For instance, if your commercial unit’s annual value is about $60,000, you will have to pay an annual property tax of $6000.
If you have hired an agent to look for a suitable commercial property for you, they will charge a fee, also known as an agent’s commission. This is usually about 0.5% - 2.0% of the property’s selling price. The commission is usually paid directly to the agent, out of your own pocket or as part of your company’s expenses.
To save on agent commission, you can use Lendingpot, which is a loan aggregator platform that is completely free to use. You won’t have to worry about any charges as the platform earns by commissions directly from the loan providers.
By accounting for the additional fees mentioned above, you’ll have a more accurate picture of the actual costs. An accurate estimate helps you or your company avoid unpleasant surprises. It also allows you to better recognise valuable promotions when you encounter them or uncover ways to reduce your overall expenditure. Compare multiple commercial property loans with Lendingpot. Apply now with your Singpass Myinfo and gain immediate access to over 45 leading financial institutions.
Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.
