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.
A Virginia Commercial Mortgage is a type of loan that is secured by a commercial property in the state of Virginia. It specifically refers to a mortgage that is used as security for a Balloon Promissory Note. A Balloon Promissory Note is a type of loan agreement where the borrower agrees to make regular payments of interest and principal for a specified period of time, with a large "balloon" payment due at the end of the term. This final payment is usually much larger than the regular payments and represents the remaining principal balance. When a commercial property in Virginia is used as security for a Balloon Promissory Note, the lender will have a mortgage on the property. This means that if the borrower fails to make payments according to the loan agreement, the lender has the right to foreclose on the property in order to recover the outstanding balance. There are different types of Virginia Commercial Mortgages that can be used as security for a Balloon Promissory Note, depending on the specific terms and conditions agreed upon by both the lender and borrower. These may include: 1. Fixed-rate Mortgage: In this type of mortgage, the interest rate remains constant for the entire term of the loan. This provides predictable payments for the borrower and lender. 2. Adjustable-rate Mortgage (ARM): Unlike a fixed-rate mortgage, an ARM has an interest rate that can change over time. This is typically based on an index, such as the prime rate, and can lead to fluctuations in the borrower's payments. 3. Construction Mortgage: This type of mortgage is used when the commercial property is still under construction or major renovations. The loan is disbursed in stages or as the construction progresses, with the property serving as security for the Balloon Promissory Note. 4. Bridge Loan: A bridge loan is a short-term loan that helps bridge the financial gap between the purchase of a new commercial property and the sale of an existing one. It is often used to secure the Balloon Promissory Note until a permanent financing solution can be obtained. 5. Mezzanine Loan: A mezzanine loan is a second mortgage that sits behind a primary mortgage. It provides additional financing based on the equity in the property, and can be used as security for a Balloon Promissory Note. In summary, a Virginia Commercial Mortgage as Security for Balloon Promissory Note involves using a commercial property as collateral for a loan with regular payments and a larger final payment. Different types of mortgages, such as fixed-rate and adjustable-rate, construction, bridge loans, and mezzanine loans, can be used as security for this type of loan in Virginia.
