Posted by Mark on November 03, 2000 at 24:37:53:
Not all commercial loans are balloons, but many are. The idea is that commercial loans are generally higher dollar loans and lenders don’t want to lend out large sums of money at a fixed rate for a long period of time. Especially when interest rates are relatively low. So, lenders will generally either have a fixed rate with a balloon (3-10 years), or a adjustable rate with a long term. With your 3 year balloon, if you have made your payments on time, most lenders will just renew the loan at the then current interest rate. The lender is not obligated to renew the loan, but most do. Usually about six months before I have a balloon due, I start making calls. I see if the lender will renew the loan. If not, I start shopping for other lenders to refinance. Unless the market value of the property has dropped significantly, you shouldn’t have a big problem refinancing. If you are uncomfortable with a balloon loan, keep looking for another lender. If you post the area of the country you are in, maybe others on the board can refer you to a lender.