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Are Fully-Amortizing Loans or Balloon Terms Best for Your Commercial Borrowers?

Commercial Mortgage
Posted on 
November 6, 2014

The post-recession commercial mortgage market can be unnerving for borrowers. The fact that capital availability isn’t constant is often a major concern for small business owners.  As a broker, it’s important that you understand this problem. It’s because of this uncertainty that fully amortizing loans can be a very attractive option for some of your borrowers. Here are some reasons why:

They have more control

When your borrower has a balloon payment loan, they’re subject to market conditions beyond their control. With a long-term, fully-amortizing loan, they’re more in control of their situation and won’t need to be concerned about whether or not their loan will be renewed in a few years. Also, with a fully-amortizing loan, your borrower has the freedom to keep the debt until maturity, owing nothing, or simply pay off the loan.

The terms might be preferable

Certainly bank rates are great for qualifying commercial borrowers. However, a fully-amortizing loan with better terms overall might justify a higher rate for your borrower.

They don’t need to worry about refinancing

If your borrower has a fully-amortizing loan, they can focus on making their mortgage payments and the growth of their business instead of worrying about needing to refinance if the bank decides not to renew their loan. This gives your borrower plenty of breathing room and will allow them to accomplish their goals without undue stress.

It’s important to remember that for some borrowers, the terms of a commercial mortgage are more important that the rate. The control and freedom that these types of long-term, fully-amortizing loans can provide your borrower is often worth a lot to them. With these kinds of mortgages, they can focus on their business without worrying about market conditions or the need to refinance.


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