A balloon mortgage payment is more common with commercial mortgages than with residential mortgages. Yet, many business owners find the large lump sum payment at the end quite cumbersome. These people are looking for a no balloon payment commercial mortgage loan, which spreads the loan payment out evenly.

While some business owners prefer the low balloon mortgage payment rates, there are many risks involved with a balloon mortgage:

1. A balloon mortgage does not build equity as quickly as a commercial mortgage with no balloon payment. Your monthly payments primarily cover interest, which can be detrimental if you later need to take out an equity loan.

2. Your monthly payment will drastically increase if you switch to a fixed rate commercial mortgage loan. Balloon payment mortgages have much lower monthly payments. If you are used to the lower payment, you may find that it's harder to keep up with the higher payments.

3. When you later want to refinance to a commercial mortgage with no balloon payment, you may find that interest rates have increased. This could mean that you spend a lot more money in the long run.

Action Steps to Commercial Loans
The best contacts and resources to help you get it done

Apply for a fixed rate, no balloon payment mortgage for security

It's often best to take out a fixed rate mortgage for your commercial property mortgage. Balloon payment mortgages offer smaller monthly payments, but you must pay a large lump sum at the end. With a fixed rate mortgage, you always know what your monthly payment will be.

I recommend: Apply for a commercial real estate loan through US Bank. Commercial Direct also has commercial loans for a number of different property types.

Consider adjustable rate mortgages instead of taking on a balloon mortgage payment

Some people confuse adjustable rate mortgages (ARMs) with balloon payment mortgages. Adjustable rate mortgages also offer lower monthly payments, but at the end of the initial term, you simply may have to pay a higher interest rate, not a lump sum payment on your mortgage loan. No balloon payment means that you can still easily pay off the loan over time, even though the interest rate may increase.

I recommend: Fifth Third Bank offers adjustable rate mortgages for business owners. You may want to compare the rates offered by a variety of banks. You can do this through Bankrate.com.

Refinance your mortgage to avoid a mortgage balloon payment

If you started with a balloon mortgage and find that you cannot pay the lump sum payment at the end of the term, it's time to refinance your mortgage. With improved credit, you may be able to get a better deal than when you initially applied.

I recommend: Countrywide has excellent refinancing options for new and current customers. You can apply for commercial mortgage - no balloon payment - through Bank of America.

Tips & Tactics for Getting a Commercial Mortgage

Helpful advice for making the most of this Guide

• •  New business owners may find a balloon mortgage attractive due to the low monthly payments. However, you should try to get a no balloon payment commercial mortgage if it's at all possible. It's the wiser financial decision.