Non Standard Mortgages - Commercial
Commercial Mortgages Repayment Options
When deciding on your repayment schedule you should always
remember the longer you take to payback the principal the
higher your total interest payment will be.
"Equal" Payments: Probably the most common schedule,
this type of mortgage requires you to pay the same amount
each period (monthly or quarterly) for a specified number
of periods. Part of each payment covers the interest and
the rest reduces the principal.
"Equal" Payment and a Final Balloon Payment: This
type of mortgage requires you to make equal monthly payments
of principal and interest for a relatively short period
of time. After you make the last instalment payment, you
must pay the balance in one payment, called a balloon payment.
Some lenders will give you the option to refinance the mortgage
to help you stretch out the final balloon payment. This
type of mortgage offers definite benefits to you. Because
of the lower monthly payments during the course of the mortgage,
you can keep more cash available for other needs. Of course,
when you are thinking about those nice low payments, don't
forget the big balloon payment waiting around the corner.
Interest-Only Payments and a Final Balloon Payment:
With this type of mortgage, your regular payments cover
only interest. The principal stays the same. At the end
of the mortgage term, you must make a balloon payment to
cover the entire principal and any remaining interest. The
obvious advantage of this arrangement is the low periodic
payments. But over the long term, you will pay more interest
because you are not reducing the principal sum on which
you pay interest.
Endowment Mortgage: This type of mortgage is similar
to an interest-only mortgage but the repayment of the principal
comes from the proceeds of an endowment. Several types of
endowments are eligible for this type of mortgage, they
include: life assurance policy, personal or executive pension
plan policy, or a personal equity plan. The additional security
provided by the endowment usually result in a lower interest
rate.
