When it comes to a ball payment and amortization, I know you pay interest only payments for about 5yrs then pay the total amount on the final year (for a Ballon payment) , but how does a 30yr amortization come into play?
Question
[{"id": "ievgsa4", "text": "You\u2019re not paying interest only payments on an amortizing loan unless it\u2019s a designated I/O period during the term. Those are usually at the beginning to allow for tenant upfits/re-leasing/construction. \n\nAre you maybe referring to a bridge loan which is interest only  for the term that is refinanced into an amortizing term loan at maturity?", "replies": [], "depth": 1}, {"id": "ievgul6", "text": "It's either interest only or amortized.", "replies": [{"id": "ievigs9", "text": "It can be interest only for a period of time and then convert to p&amp;i", "replies": [], "depth": 2}], "depth": 1}, {"id": "ievgzqw", "text": "The payments are based as if you were amortizing the loan over 30 years.", "replies": [{"id": "ievu03v", "text": "This is correct", "replies": [], "depth": 2}, {"id": "ievw6oc", "text": "Thanks I was confused, when I hear some commercial real buyers state they bought a property under a ex. 5 year ballon payment with a 20 year amortization. I searched up ballon payment and received a clear definition but for amortization I was still confused since after a ballon payment the property is paid for so I was thinking what about the remaining 20 years for example.", "replies": [{"id": "iewfjf2", "text": "The terms in your example are commonly referred to as \u201c5/20\u201d. \n\nIf you had an interest-only period you would see \u201c5/20 with X years i/o\u201d.", "replies": [], "depth": 3}, {"id": "iexx7cw", "text": "Very often borrowers just renegotiate the loan when the balloon is due, so effectively it rolls over for another, say, 5 years. New interest rate, and of course the bank doesn't have to agree, but it's pretty common.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ievpv2x", "text": "There are few if any 30-yr loans in commercial real estate.  I/O is exactly what it sounds, but non-I/O loans still have a balloon payment even if they amortize over 25/30 years, you still pay a balloon at the end of the 5/7/10/15 yr term, but the balloon is reduced by principal based on the principal payments on a 25/30 year amortization schedule.", "replies": [], "depth": 1}, {"id": "ievqali", "text": "Sounds like you are talking about an SBA 504 small business loan program but you haven't really grasped all the details. Have your commercial lender explain it to you. There's more to this than can fit in a Reddit comment. \n\nHere's the link to the program: [https://www.sba.gov/funding-programs/loans/504-loans](https://www.sba.gov/funding-programs/loans/504-loans). It has been a lifesaver for many of my clients, buyer only needs to put 10 percent down, bank and the feds come up with the rest. There is long term amortization. Longer than the normal commercial loan. \n\nThe caveats are you must use at least 50 percent of the property for your own business and there is a prepayment penalty if you exit early. \n\nOh yes, the process is slow and the paperwork is massive, but totally worth it.", "replies": [{"id": "if8kla1", "text": "No", "replies": [], "depth": 2}], "depth": 1}, {"id": "ievvfwx", "text": "U get interest only for 1-5 years usually the principal amount gets added after the io period is up \nyour term is when the balloon payment is due usually 7 or 10 years\nFor instance a 5% interest 5 years i/o 10 year term 35 year amortization would on a 5m loan would be as follows\n5year i/o payments is 249,996\nAfter 5 years aka year 6 you will strt paying 302,808\nThen year 10 4.3m will be due for balloon payment", "replies": [], "depth": 1}]