Fact Check on On Balloon Loan

[Lauren Daly]

My commercial division mortgage advisor at my credit union tells me that after the 5 year period on my balloon loan they will ask for new financials, and we can refinance my balloon loan with no refinancing fees attached, and the rate will just change subject to whatever happens with market rates. Basically he explained an ARM where they get to pull my financials every 5 years. Does that sound right?

Backstory: I have a contract on a condo I found on the MLS. I typically work through the residential loan department at my credit union to get a 15 year fixed rate mortgage. However, our portfolio has a lot of equity tied up in it, so I wanted to get a RLOC (that's what my CU calls it) so I can have more flexibility when it comes to renovations, purchasing, etc. in the upcoming months. RLOC's go through the commercial division. So I can get the RLOC and still go through the residential loan department but... I thought it would be easier to get it all done with 1 advisor (maybe I should check rates against residential and commercial?). Anyway, my realtor didn't realize we were using the commercial person this time, sent the residential advisor the contract, and she said that condos are having a hard time getting fixed rate financing like I'm used to and prefer, due to the condo collapses in Florida... she can only offer me a balloon product. So then I call the commercial guy and he's like 'oh yeah, we only do balloon loans' (not what he said the first time). So, both residential mortgage and commercial mortgage are only able to do a balloon on this property. It's one of those properties that just carries so much upside it will work in a lot of situations, so thankful that I found one of those so that I can learn this whole balloon system with a lot of room for error.

If any of that sounds not quite right to you, let me know. I've not done the commercial/balloon loan and I don't know anyone that has a commercial/balloon loan that can advise me through this. Any help is appreciated!

[Ned Carey]

@Lauren Daly yes it is typical to get a balloon loan for commercial. However some lenders do offer 30 years loans depending on the property. Look for lenders like Dominion Financial, Lima One or Lending One these are called DSCR lenders. There are lots of them.

I certainly would expect a lender to expect updated financials on what is essentially a refinance with a balloon loan. .