Commercial loan refi at term end

[Mark Byrge]

I am currently approved for a commercial loan that is amortized over 20 years, but with a 5 year term. At the end of the 5 years, are these typically "refinanceable"? Or should I be aggressively trying to pay this down? I feel that the numbers work favorably and it's a solid investment for both sides, but just looking for input from others that have experience. Thank you in advance!

[Jon Holdman]

Any loan is "refinancable", provided you can find a lender to give you a new loan.  Commercial loans (in the US) commonly have balloon payments like this.  The 20 year amortization period gives you a lower payment while the five year balloon protects the lender from having their money tied up at a low rate.

Finding a new lender is key. The existing lender may or may not be willing to give you a new loan. An investment group I'm in did this a few years ago on a mini storage. It was tough and we almost lost the property. We went through a number of possible lenders before finding one that would do the refi. And it was a cash-in refi where a new injection of cash was needed to so the new loan met the lender's LTV requirements.

Commercial loans are all about the income produced by the property.  In our case, they looked at five years of income statements.  Weak years at the start of that time, right after we bought the property and were still getting it turned around, hurt the value.