Question:

How are interest only commercial mortgage loans structured?

Answer:

Interest-only commercial mortgage loans require interest only monthly payments for several years. No capital is repaid for limited time.

Businesses are usually expected to prove capacity to repay the loan. Sufficient investments and assets need to be demonstrated before an Interest Only commercial loan is approved by the mortgage lender.

Interest only commercial mortgages may be of great use to businesses, which are able to prove that they can repay the loan in full in several years. A commercial lender is able to provide millions of dollars but the borrower needs to present appropriate security and/or business plans.

Common Interest-Only Commercial Mortgage Terms

  • Commercial IO loans can be Conforming, Non-Conforming, Prime, Near-Prime, or Subprime mortgages with fixed or adjustable rate;
  • Mortgage terms limited to 10 years interest-only period;
  • The loan is expected to be repaid by the end of the IO period;
  • 10 to 30 years amortization might be possible. Not every commercial lender will allow that;
  • Traditional and non-traditional properties;
  • Usually $250,000 to $10,000,000 loan amounts;
  • Smaller loan amounts, under $2 mil, are underwritten under streamlined procedures;
  • 2 years in same business and FICO over 600 are required for full documentation commercial mortgage underwriting (both for Owner-Occupied and Investor properties);
  • FICO over 680, considerable liquid assets or business plan required for reduced doc (stated income) Interest Only commercial mortgages.
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