CRE-lenders that do not require balloon payments (conventional lending)
Hi everyone! I am having a hard time finding lenders that lend on commercial properties without having a balloon payment due at the end of the loan term. I am looking to put 20-25% down but have the loan carried for 15 or 30 years. All I am finding are lenders that want a balloon payment of the entire loan amount after 10 years, or refinance once the balloon payment is due. Does anyone know any lenders that do this for commercial properties? Is this even a thing for commercial lending? I am looking to scale and purchase a greater number of units hence why I am looking for 5+ units. For reference I am looking in the Pittsburgh area. Thank you guys in advance!
[{"id": "iign3c3", "text": "That is not common in commercial loans. \n\nI would check in with a residential mortgage broker as some residential lenders are opening up to more units on 30 year loans.", "replies": [], "depth": 1}, {"id": "iigo1tv", "text": "Do you understand why lenders want a ballon, and what's different about your situation to mitigate those concerns?", "replies": [{"id": "iigo91w", "text": "No! Can you explain please why they would want a balloon payment? I\u2019m assuming that it\u2019s because they do not want their money tied up so they can continue to lend to others. I\u2019m still learning a lot on the commercial side\u2026", "replies": [{"id": "iigplmc", "text": "Interest rate risk.\nDuration risk.\nRegulatory/compliance risks.\nThe secondary market for commercial loans is much thinner than the residential, so there is capital risk.\nThey want a chance to reassess the property and/or you as a borrower. \n\nBalloons aren't a \"balance due the day after maturity or we begin foreclosure\" situation; they are more of a touch point to reassess, reprice, or potentially exit a loan. The best way to exit a lending relationship is for the borrower to refinance somewhere else.", "replies": [{"id": "iiguiub", "text": "Makes sense! Thank you for the clarification!", "replies": [], "depth": 4}, {"id": "iih4grw", "text": "Good info. Any sources for people wanting to know more?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iigqku9", "text": "Fannie has a 30 year fixed product for multifamily", "replies": [{"id": "iigukpr", "text": "I looked into them as well but had a hard time reaching out to an individual. I saw great info online. I will try again.", "replies": [{"id": "iigzayn", "text": "Here is a list of DUS lenders that originate Fannie loans: https://multifamily.fanniemae.com/about-multifamily/our-partners/dus-lenders", "replies": [{"id": "iii471s", "text": "Thank you!", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iigslfz", "text": "What you are wanting is called a Non-QM lender. They do 30 year fixed interest rate loans on commercial property or non conforming residential property. Expect an interest rate of 1-3% higher than what your currently getting from the bank. Geneva Financial is well recommended.\n\nI understand your dislike of balloons. Me too. Here's what I've done on my commercial loans. And mind you, this takes negotiation, experience and a very good relationship with a smaller lender. My loans are 4% for 7 years with a 25 year am and term. Instead of ballooning at 7 years, they renew for another 7, all the way to the 25th year. This isn't that unusual either - most loans renew at the current market rate. What makes mine so special is that mine have a guaranteed rate cap of no more than +2% on top of the original loan interest rate. So my 4% loans will be between 4-6% for 25 years. That's special. That's amazing. That's safe.\n\nYou can work toward that too, when you realize that you don't need the money from the bank. They need your loan. That's when you can negotiate.", "replies": [{"id": "iigulip", "text": "Thank you so much! This was very helpful!", "replies": [], "depth": 2}], "depth": 1}, {"id": "iih4lt1", "text": "30 year fixed rate loans only exist because the US federal government subsidizes them through Fannie Mae and Freddie Mac. If it weren't for that, they would not be common on residential properties either.", "replies": [], "depth": 1}, {"id": "iihyksp", "text": "I suggest calling around to community/regional banks; eventually you will find one in your area that will do fully amortizing. I've had plenty of loan officers say \"oh that's just what everyone does\"...until you start to find a few that will do fully amortizing loans. Sure the rate may float or reset after 5 or 7yr, but that's entirely different than a balloon from a risk perspective.", "replies": [{"id": "iii45m2", "text": "Thank you! I will continue to call around.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iij7zfm", "text": "That\u2019s because nobody does that in the commercial loan world. \n\nI\u2019m a commercial lender. But what I can say is I can offer 20% down if the DSCR works, with no loan origination fees.", "replies": [], "depth": 1}]