Re:US office owners face $117B wall of debt repayments
by chrisco255 on Monday January 01, 2024 @01:14PM
(#38833893)
> this seems to be a significant advantage for commercial mortgages over residential ones.
"Interest only" loans are not really advantageous. It means by default you are never paying down your principal and you are forced to refinance when the balloon payment is due (usually 5 years or so). So if you signed a loan when rates were low, you would have been better off to get a long term 30 year fixed interest loan. Otherwise your payment can more than double or triple right along with interest rates.
And since you're not paying down the principal, it's easier to find your loan under water. Although it is typical for commercial real estate loans to require a 20% down payment.
"Interest only" loans are not really advantageous. It means by default you are never paying down your principal and you are forced to refinance when the balloon payment is due (usually 5 years or so). So if you signed a loan when rates were low, you would have been better off to get a long term 30 year fixed interest loan. Otherwise your payment can more than double or triple right along with interest rates.
And since you're not paying down the principal, it's easier to find your loan under water. Although it is typical for commercial real estate loans to require a 20% down payment.