Thoughts on commercial balloon loans

[Justin Butterfield]

Im interested in purchasing a commercial rental property and so far every bank I talk to is only offering balloon payment loans. They say they will just extend the loan after the 5 year is up for another 5 year term but to me this is still a bit scary as they could early not extend the term and I will be stuck with the whole note due. Just wanted your guys opinions on this and weather or not this is a real concern.

[John Warren]

@Justin Butterfield this is normal in the commercial mortgage world, although you can definitely get a longer term than 5 years if you are willing to give up something on the interest or point side. It is even possible to find a 15/15 mortgage if you ask around enough. The banks are simply being compensated for the higher risk of doing a commercial loan.