A balloon payment is the final payment needed to satisfy the payment of the entire principal amount due on a note, if different from the monthly payment. It is a lump-sum principal payment due at the end of a loan. For example, a loan may have monthly payments as if the principal amount were amortized over thirty (30), but a balloon payment could be due at the end of fifteen (15) years, at which time the loan would have to be paid in full or refinanced.
Some states may require that the balloon mortgage clause appear in bold or upper case typeface. It is placed at the top of the first page and again directly above the signature lines. The clause might be required when the final payment or principal balance due at maturity is greater than twice the amount of the regular monthly or periodic payment. A different statutory clause may be required when the note has a variable or adjustable interest rate. Failure to include the clause may result in an automatic extension of the maturity date of the mortgage.
Keywords: New York Commercial Mortgage, Security, Balloon Promissory Note, Types Description: A New York Commercial Mortgage as Security for a Balloon Promissory Note is a specific type of loan agreement used in the commercial real estate industry. This arrangement involves securing the loan by using a mortgage on a commercial property located in New York. The mortgage serves as a guarantee that the borrower will fulfill their obligations under the Balloon Promissory Note. In such transactions, the Balloon Promissory Note, also known as a balloon payment loan, typically has a short-term, fixed-rate period, with a significant portion of the principal due at the end of the term. The loan term is usually between three and ten years, but what distinguishes this type of loan is the large "balloon" payment due at the end. This payment is typically larger than the periodic payments made throughout the term. There are various types of New York Commercial Mortgages as Security for Balloon Promissory Notes that borrowers can consider based on their specific needs: 1. Traditional Commercial Mortgage: This is the most common type of commercial mortgage used as security for a balloon promissory note. It involves the borrower securing a loan with a mortgage against the property, with periodic payments made throughout the loan term until the balloon payment becomes due. 2. Interest-Only Commercial Mortgage: This type of mortgage allows the borrower to only pay the interest portion of the loan during the term, with the entire principal amount becoming due at the balloon payment date. 3. Adjustable-Rate Commercial Mortgage: In this type of mortgage, the interest rate is adjusted periodically based on market conditions. This can result in variable periodic payments until the balloon payment is due. 4. Mezzanine Loan: This is a second mortgage that acts as additional financing on top of the primary mortgage. It can be used to secure a balloon promissory note by providing additional collateral to the lender. This type of loan is often utilized when the primary mortgage does not cover the full financing needed. 5. Bridge Loan: A bridge loan is a short-term financing option that can assist borrowers in achieving their immediate financing needs. It offers temporary financing until a more permanent loan, such as a commercial mortgage, can be obtained. When considering a New York Commercial Mortgage as Security for a Balloon Promissory Note, it is crucial for borrowers to thoroughly understand the terms, conditions, and repayment obligations associated with their chosen loan type. Seeking professional advice from lenders and legal experts experienced in commercial real estate transactions is highly recommended ensuring a successful outcome.
