20yr vs 15yr commercial financing
Hey BP,
I just got a 2 unit property under contract which I am purchasing for $39k cash under my LLC. My current estimates on rehab are $40k. My plan is to get a loan from my local bank for $80k to repay my investors and fund the rehab. This property will be a long term indefinite hold.
I just got off the phone with my banker and he gave me an option for what terms I would like for this property which is something new this bank is offering. The first is the normal 5/20 at 4.25%. Which is the loan amortized over 20 years, adjusting interest rate every 5 years (typical commercial financing.) But then he told me about a new option of 10/15 at 4.75%. Which is the loan amortized over 15 years but it only adjusts interest rate once at 10 years.
I will still cashflow with both terms, but I'm struggling to decide which option would be the best long term. I like the idea of locking in my interest rate for 10 years, but I also like the lower payment of the 20 year. I know the saying goes "you can always pay more, but you can never pay less". Should that apply here?
Thanks for your input!