10/25 balloon loan or 15 year fully amortized for commercial real estate purchase?
I have the option of a 10/25 balloon or a 15 year fully amortized loan for a commercial property I am buying.

Both loans have $0 app fee, $0 appraisal fee, and .5% origination fee.

15 year amortized:

* fixed rate 5.130%
* fully amortized
* 15 year length
* 80% LTV
* Fully leased cash flow after all expenses including 10% vacancy, 5% repairs factored in = $1,048.01

10/25 balloon:

* fixed rate of 5.430%
* balloon payment at 10 year mark
* amortized over 25 years
* 75% LTV
* Fully leased cash flow after all expenses including 10% vacancy, 5% repairs factored in = $1,833.75

**The 10/25 would give me $787.74 more in cash flow per month vs the 15 year.**

**10/25 loan** would be more cash up front but better cash flow. The balloon payment after 10 years is something I've never dealt with. My thought is I'd either have to refinance at the 10 year mark if I want to keep the building or start marketing it at the 8 or 9 year mark to sell it before the 10 years is up?

**15 year loan** would mean its fully paid in 15 years, however I'm sure I would end up refinancing the property at some point around the 8-10 year mark anyway to free up the equity to purchase more real estate.  The 15 year does give me the safety net of *not* being forced to refinance at the 10 year mark or having the option to just keep it paid off and have a real nice chunk of cash coming in every month.

I'm all about cash flow, the more the better, but being unsure of the risk of not being able to refinance at the 10 year mark for the 10/25 has me a little nervous.  Plus, who knows what interest rates will be in 10 years!

Both options are very appealing to me. So my question to you is, what would you choose and why?
[{"id": "ex3qs4n", "text": "When did you get these quotes? Seems high", "replies": [{"id": "ex3roxd", "text": "This morning.", "replies": [], "depth": 2}, {"id": "ex3s5rc", "text": "Do you think there's a bank that offers better loan rates than 5.13% - 5.43% interest and 0.5% origination fee?", "replies": [{"id": "ex3sg8m", "text": "Depends on credit and other factors. If you have only got one quote you\u2019re insane.  If you have a net worth and can switch banks for processing sometimes you can get better rates. Always ask how to get better rates.", "replies": [{"id": "ex3z1wj", "text": "No, I meant do you specifically know of a bank with better rates? \n\nI have ace credit and high net worth. These are the best rates I've found.", "replies": [{"id": "ex43bwb", "text": "Where are you located?", "replies": [{"id": "ex4f1f9", "text": "United states", "replies": [{"id": "ex4guta", "text": "Try regional banks that keep the debt on their sheet. Also try to see if you can find 15 year ammo with an interest only payment option for a couple years if the cash flow is important.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ex3zmm9", "text": "Depending on the loan amount, these rates are high. Especially given that the swaps rates have dropped significantly in the past month.", "replies": [{"id": "ex42nq1", "text": "About $340,000", "replies": [{"id": "ex5sa0y", "text": "Couple of thoughts:\n\n1. With that loan amount you should be in the 4% range, maybe even high 3\u2019s depending on the location and the property. As someone recommended below, try a local bank and credit union. For the larger nationwide banks, they can be competitive but it takes the same amount of work/ diligence on a small loan amount as it does for a large deal and sometimes the fees they would win are not worth it. Therefore, if it\u2019s in a small market, they may give you a higher rate to compensate. \n\n2. I wouldn\u2019t be as concerned about origination and application fees unless they\u2019re exorbitant (up to 2% is typical in the industry) as you will be saving much more over the length of the loan. For example, an interest rate of 4.5% compared with your rate will save you a lot more year over year on the spread than the 1% ($3,400) you would save in origination fee on your current quote... assuming you\u2019re in it for the long haul. \n\n3. To give you some perspective, I was able to provide a 4.45% 10/25 quote on a $80M hotel with declining cash flows to a client and they are still considering whether to try and shop for a lower rate. Hotels tend to be more riskier than stabilized assets like multi-family or even office space. So, unless you are acquiring a hotel or retail property, your quote should be at least around mine if not less. \n\nUnfortunately the loan amount is too small for us, otherwise I\u2019d be happy to provide you with a quote. Should you have any other opportunity in the $1M+ range, I\u2019d be happy to take a look and help. Nonetheless, still open to any questions you may have.", "replies": [{"id": "ex64xxu", "text": "This is fantastic advice, thank you so much! I'll definitely keep looking.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ex4ls68", "text": "Just got quoted at 4.8 yesterday for a 5/25 commercial.\nI always talk to 1 big bank. 1 regional bank. 1 credit union.", "replies": [{"id": "ex4r2di", "text": "5/25 is much different than 10/25 tho.  Its half the term.  Plus 5 years means I pretty much have to sell it or refinance it right away. 5 years is not a very long time. \n\nI wouldn't want to go less than 10 years. I really have no plan of selling this property. There's 10 units and it cash flows really well.  I'd definitely want to keep it for at least close to the 10 year mark. \n\nThinking about it more with the additional input I've received, I think I'm going to do the 15 year. I'm still going to keep looking to see of I can find a better rate but I'm happy with the terms I've found if that's the best I can get.", "replies": [], "depth": 4}, {"id": "ex5cgjz", "text": "Where are you located? I\u2019m a commercial lender, my 5/25 is 3.85% right now", "replies": [{"id": "ex5d5ds", "text": "Midwest. That's solid af...what bank you with?", "replies": [{"id": "ex5n784", "text": "US Bank. I can lend in most of the Midwest if you\u2019re interested. Also no loan or origination fees", "replies": [{"id": "ex6x2t2", "text": "Sent you a pm", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ex49ytw", "text": "What\u2019s your other mortgage debt, income and NW like? There\u2019s no wrong choice here, sometimes a mix of 15yr for max pay down and 30yr for max cash flow is best, assuming you have multiple properties. Its preference imo.", "replies": [{"id": "ex4eztl", "text": "I only have one other investment property. Residential with a 30 year.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ex5cak2", "text": "What state are you located in? These rates are terrible. I\u2019m a commercial lender. My rate on 10/25 would be like 4% and 15/15 would be 4.25%, no origination or app fees, you pay property evaluation but at that amount it would only be $575. PM me\n\nAnd to your question, I would choose the 25 year amortization for max cash flow. The adjust at year 10 most likely won\u2019t be much interest rate risk.", "replies": [], "depth": 1}, {"id": "exray2t", "text": "Rates don\u2019t seem great. We have had 2 quotes for a property we\u2019re buying($43.8M). 75% LTV 3.8% 30 year 2 years I/O. 75% LTV 3.6% 30 year no I/O. Both obviously balloon.. you should contact a debt broker and see if you can\u2019t get better rates. It\u2019s crazy how low they are right now", "replies": [], "depth": 1}]