I bought two commercial properties in 2017. Both of them have 10 year loans that are fixed for first five years and adjustable rate for the last 5 years. Both these loans are amortized over 25 years and I have decent cash flows here. The lender told me that loans are due at the end of 10 years when I can either pay them off or refinance. I am worried if I am unable to refinance do I lose properties? My credit and cash flow situation is pretty good but I am thinking of worst case scenarios. Has any of you lost sleep over tis issue that commercial loans are only 10 years and ot 15 or 30 years like residential. Please share your experiences/thoughts.
Some people have only seconds to fix a potential problem; you have up to ten (10) years. I have faith you can do it.
You need to monitor interest rates and your credit rating regularly anyway. You may get a chance to refi before the ten-year period.
My wife is uneasy with these types of loans due to the balloon aspect, but I'm generally OK with them, as I keep a solid credit score, good income, ample reserves, and have good relations with many conventional and private lenders. So my expectation is that went a loan comes due, I'll have the funds to pay it off in full, and if I do not or would rather not - I shouldn't have any problems refinancing with the same or alternate lender.
Plus, if the property has appriciation during those 10 years or is a 5-Unit (or more) multi-family that has been maintained and managed well (increasing rents), it should be worth far more than owe'd, further making it easy to refi. So my only fear would be having the 10 years come due right in the middle of a major economic crisis when little to no money is available for refi. That could then bring the worse case senario where you lose the property - But I think that to be unlikely with all else I've detailed above being true.
Thank you gentlemen. It is a 6 unit apartment building and a 5 unit strip mall. I plan to pay at least one of these two properties in full for sure. I have several other properties that are two flats, SFHs, condos etc. some of which have 30 year fixed and some of these are paid off.
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