Which Financing Terms to Accept?

[Nick M.]

Hi All,

Feedback requested.

* Situation: I am in contract to purchase an apartment building.  Purchase price $1.5M,  $400K down, for a loan of $1.1M  By making extra payments towards the principal and a large lump payment I expect to have the loan down to $400K in 5 years.  Similarly, by making extra payments I forecast being able to pay down this $400K balance in an additional 7 years.  That makes payoff in a total of 12 years.

* Financing offered:
1) 4%, 5 year fixed at 30 amortization

2) 12 years.  First 7 years fixed at 4.375%.  Second 5 years readjusted at 5 Year Treasury + 2.625%, floor rate of 4.375%

3) 10 years fixed at 4.75%

* My Goal:
First priority is get loan balance down to $400K.  If I can pay this off in another 7 years, great.  If not, no worries.  My intent is to keep the building indefinitely.

Of the 3 financing options I have, what would you recommend?