commercial loans for residential real estate

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I was a commercial banker for over 20 years. I see some posts on here that are either against, adverse or just highlighting trepidation's about using commercial financing for residential deals. I'd like to demystify that debt structure and give some advice as to how to do it while giving you some flexibility and options after signing on the dotted line.

The 5 year call - yes. Most banks will have a call or balloon option for a loan at the 5 year anniversary, however the amortization will not reset. There may be another commitment fee but you will not need title and in most cases you will not need an appraisal. Fees will be small and you will continue your 20 or 25 year amortization as if it never stopped.

Rate - there will or maybe be a rate reset at the 5 year mark. But you do not have to be completely in the dark. You can ask to have your rate reset based on a current spread of an indicator like fed funds borrowing rate or prime. This means that you will be able to track your potential upcoming rate. Further if rates go down you will likely be offered the lower rate and not tied into a higher prenegotiated rate.

Collateral - many people do a blanket mortgage and are worried about unraveling in the case that they want to sell a mortgaged property. I suggest handling this two ways. One you can do individual mortgages so when it comes time to unravel you have an individual payoff amount and can do so easily. Secondly, a bit more complicated but, you can have a collateral pool loan to value written into the documents. You may need Jew appraisals but if you find that your ltv is adequate without the property you plan on selling you can easily have that property released as it's documented into the loan that this is allowed.

These are just some of the bigger issues and questions I have seen about these types of loans but. I am happy to be a resource for anyone who has questions about lending scenarios of this type. I am no longer a lender so would not benefit nor am I soliciting just happy to help and provide some real life experience here.