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Commercial Real Estate Loans vs Home Mortgages
Commercial real estate loans are a different animal than their home mortgage counterparts. Learn the differences so that you are prepared when walking in to the commercial lender.There’s a few basic differences when it comes to commercial real estate loans versus home mortgages. While both require due diligence and forethought, CRE loans have increasing regulations and restrictions and are not as easy to qualify for. One of the big surprises for those just entering the market may be the balloon payments associated with commercial real estate loans.
A balloon repayment plan starts with the same terminology. It may be a 30-year mortgage with payment on both interest and principal. But that is where the similarity ends. Following a preset time of 3, 5 or 10 years, a balloon payment is due, at which point the entire outstanding balance is payable. Needless to say, this is where many a business falls through the cracks.
And what happens as the balloon payment nears? If they have not been able to put aside a substantial savings, business owners and developers begin to look for alternative funding which is not always easy to secure. But if the business has had cash flow problems or the development has ... more

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