Due to most loans not having a fully amortizing schedule, a lump sum payment to an existing lender, called a balloon payment or a bullet, is paid when that loan matures. At that point, you’ll either need to sell, refinance, or pay the loan off with cash. The following are some important details that a borrower should be aware of as their loan matures:
- Contact your existing lender or review your loan documents to find out what the balance of your loan will be at the time of the payoff. Knowing the specific date in which the loan can be paid off is important, as lenders such as CMBS, may want loans to be paid off on specific days of the month.
- Once you know when it’s due and how much the balloon payment is, a strategic decision needs to be made concerning the payoff. A few options include the decision to refinance, pull cash out, or execute a long-term, fully-amortizing loan to eliminate dealing with a maturing loan again.
- Consult with your next lender or mortgage banker to talk through the different options. They will need property information such as historical operating statements, recent income and expense reports, a current rent roll, and third-party reports from the initial loan transaction.
Whether you have a fully stabilized property and are just looking for a rate and term refinance or you had a major tenant leave the property just before maturity and need something to bridge to permanent financing, it’s important to reach out to your mortgage banker early and start working on a strategy for your maturing loan.
- Non-recourse financing
- Lock rate at application
- Terms – Floating Rate to 40 Year Fixed
- Minimal to no reserve structure
- Current servicing portfolio of $5.5 Billion – Fast servicing decisions
- Nationwide coverage in the US on all commercial and multi-family real estate
- Loan sizes from $1 Million to $100 Million+
Founded in 1972, Pacific Southwest Realty Services (PSRS) is one of the largest privately-held commercial mortgage banking firms in the Western United States. Our funding sources include major life insurance companies, banks, credit companies, CMBS and institutional investors.
Access to diverse capital sources insures a high level of success in arranging commercial real estate loans, apartment loans, mezzanine loans, and equity transactions that our clients have come to expect. Our long-term lending relationships give us greater latitude in solving problems and closing loans in a timely manner. After the loan funds, our experienced, in-house servicing team handles many issues such as assumptions, lease approvals, payoffs, insurance and many other similar matters.