Commercial Loan with 120 year term?

Question

What are the effects of a 120 year term on a fixed rate mortgage with 30 year amortization and a balloon payment due at maturity? Would it be better to have a shorter term for any reason?

Jason Hirko · Answer

@Sharon G. Did you find this lender on Craigslist and have they asked for your bank account information yet?

Alexander Felice · Answer

as Ari said, something is incorrect because those terms are impossible. The loan period can't exceed the amortization period. also, 120 year loans don't exist

120 month ballonn with a 30yr amortization is very common though.

I suspect when you go bring this up to the lender the mistake will be found.

Jane G. · Answer

@Eric Schleif Assuming the rates are the same, which would you prefer and why? To answer your question about option B) Amortization at 25yr (no balloon).

Eric Schleif · Answer

@Sharon G.  To help answer your question...What is the rate being offered on the 10 year loan vs the 5 year ARM? Is the amortization on the 5 year deal also at 30 years or at 25 years with no balloon?

Jane G. · Answer

Thanks @Alexander Felice you were right. It was supposed to be a standard 120 month balloon with 30 year amortization. It was the result of some new software they are using at the bank. :)

To @Ari Bauer @Wayne Brooks and others:

If you had to decide between:

A) fixed 10 year term amortized over 30 years with balloon

B) 25 year loan that's fixed for 5 years and then floats over the Wall Street Journal Prime RateWhich would you prefer for a large investment you plan to hold onto for the long run?

Wayne Brooks · Answer

Strangest thing I've heard.....sounds like it is actually a 5 year term when you'd have to pay off/refinance....but could do that 24 times???  As said before, payments based on a 30 year amortization would Completely pay off the loan in 30 years.

Is this from a well known, legit lender?

Jane G. · Answer

The terms of the loan state "The term of this Note is 120 years, comprising of 24 periods of 5 years each." which seems very strange to me. It also says "Principal and interest will be paid based on amortization over 30 years with a balloon payment due at the maturity of the loan". Does this mean I will have to pay the monthly payments as you would for a 120 year long loan for the first 30 years and then pay the remaining principal balance (not including interest) as a balloon payment on the 30 year mark?

Wayne Brooks · Answer

I'm guessing you mean a "30 year amortization with a 120 Month (10 year) term/balloon".  With rates as traditionally low as they are now, I say the longer the Term, the better.

Ari Bauer · Answer

@sharong

It is impossible to have a loan term longer than the amortization period, as the loan would already be paid off once the amortization period is complete.

In your example above, the loan would be paid off in 30 years.

Commercial Loan with 120 year term?

Most Popular Reply