Commercial
mortgage
lenders
offer you
a choice
of several
different
mortgage
types. Read
the descriptions
of the most
common types
in order
to decide
which one
is right
for you!
Fixed &
Variable
Rate Amortized
Mortgages
Amortized
mortgages
are basic
loans that
are paid
back in
installments,
similar
to a college
loan or
residential
mortgage.
Early in
the life
of the loan,
the majority
of each
payment
goes towards
paying off
the interest.
While this
might seem
disheartening,
it does
mean that
tax deductions
can be larger!
As the life
of the loan
continues,
a larger
amount of
each payment
will go
towards
the principal
until the
loan is
eventually
paid in
full. There
are two
types of
amortized
mortgages,
each with
its own
advantages.
Fixed
rate mortgages
are loans
with a locked-in,
unchanging
interest
rate. The
interest
rate on
the mortgage
will remain
constant
regardless
of market
conditions.
By securing
a fixed
rate mortgage,
you can
rest assured
that your
mortgage
payment
will be
the same
each month.
This option
is a safe
and reliable
and will
be beneficial
for planning
a long-
term budget.
With
variable
rate mortgage
loans, your
payments
will fluctuate
over time.
The initial
interest
rate will
be lower
than that
of a fixed
rate mortgage;
however,
changes
in the market
could result
in increased
interest
rates and
thus larger
monthly
payments.
Variable
rate mortgages
are riskier
than fixed
rate, but
if the market
conditions
are favorable,
they can
save a lot
of money
that would
otherwise
go towards
paying off
a higher
interest
rate loan.
Balloon
Mortgage
Balloon
payments
are riskier
than amortized
mortgage
payments,
but can
be quite
beneficial
if you are
anticipating
immediate
cash flow
for your
business
venture.
These mortgages
offer shorter
terms than
amortized
loans, and
they are
structured
somewhat
differently.
Initial
payments
are very
low (and
contribute
to both
interest
and principal)
but the
last payment
includes
all remaining
interest
and unpaid
principal,
and often
comes to
quite a
large total.
At that
time, if
you are
unable to
repay the
entire balance
you could
choose to
refinance
and take
out a new
loan.
Two-Step
Mortgage
A two
step mortgage
is a hybrid
of the fixed
and variable
interest
rate mortgage
options.
With a two-step
mortgage
loan the
interest
rate will
adjust only
one time
throughout
the life
of the loan.
Interest
Only Mortgage
The interest
only mortgage
does not
provide
a loophole
allowing
you to escape
paying the
principal!
Early loan
payments
will be
smaller
and will
be put exclusively
towards
paying off
the interest.
However,
once this
initial
period of
several
years ends,
the principal
will need
to be paid
and thus
monthly
installments
will become
much larger.