commercial loan

[Jennifer Lee]

Hi BP

I'm confused, what are the terms available for commercial loan?

Is it just 5 and 10 yr?

Are there 15, 20, 30 yrs?

It maybe the bank we were dealing with, I'm under impression its 5, 7, 10
Balloon, Arm

Is there fixed commercial loans for 15+ yrs?

Thx in advanced

[David Beard]

The long term (15yr+) fixed rate commercial money is only available on larger projects, probably $1mm plus, and mainly multifamily. For smaller loans (especially anything under $500k), you will need to deal with a local bank and the terms are generally:

Rate 5-7%
Down Payment - 20-30%
Term: 5 to 10 years
Amortization Schedule for Computing Mthly Pmt: 20 - 25 yrs

Thus you have a balloon payment at the maturity date in 5 to 10 yrs, meaning you have to refinance the loan, typically can do with the same bank on a streamlined basis -- no appraisal typically needed and few fees to roll over. As long as you have paid the loan timely and your Debt Coverage Ratio is 1.25 or more (NOI/P&I), chances are very high that your bank will roll the note over for another 5/7/10 year term, at then prevailing rates.