Mortgage loan Multifamily

[Sanjoy V.]

Looking for some advice on loan payments. I had questions about balloon payments for the mortgage. Let’s say I bought a property and hold it for five years, has a mortgage for 30 years but I decide to sell the property; are we taking into account the the fine for making the payment early in our underwriting? If the loan maturity is for 10 years but if I paid back after two to five years, usually what is the fine for being at anywhere from 2 to 5 years early when the actual loan is for 10 years and amortized over 30 year

[Theo Hicks]

Hi Sanjoy,

If your plan is to hold the property for five years, I would obtain a five year loan so that you don't have to worry about a prepayment penalty.

Of course, if that isn't possible, and you know you will have a prepayment penalty, you need to account for that fee in your disposition (i.e. sales) assumptions.