83664 Resource 78777 78860 1071 1107194686781 1215930711886 Controlled Commercial Financing and Prepayment Penalties on Commercial Mortgage Loans If You Try to Pay Off a Commercial Mortgage Loan Your Penalty Might Be 20% of the Balance! <p>Most commercial mortgage lenders making fixed rate commercial mortgage loans charge a prepayment penalty.&nbsp; The reason why is because the investors who buy commercial mortgage backed securities (CMBS) want a certain yield that is locked in.&nbsp; Why?&nbsp; Imagine you are a pension plan making actuarial projections to be sure you have enough money to pay your retirees.&nbsp; You need to know that you will earn a certain amount of interest.&nbsp; This is why you buy commercial mortgage backed securities.<br /><br />The most common form of prepayment penalty is a <span style="FONT-WEIGHT: bold; FONT-STYLE: italic">defeasance</span> formula.&nbsp;&nbsp; The legal definition of <span style="FONT-WEIGHT: bold; FONT-STYLE: italic">defeasance</span> is, &quot;A provision in an instrument that nullifies it if certain acts are performed.&quot;<br /><br />When a borrower wants to pay off a fixed rate commercial mortgage loan, he must perform an act; i.e., he must give to the lender a bundle of U.S. Treasuries that provides the lender with the same stream of interest payments and the same balloon payment as the original mortgage.<br /><br />Buying and assembling these U.S. Treasuries is immensely expensive, often on the order of 15% to 20% - and sometimes 25% - of the principal balance on the loan!&nbsp; Watch out for loans with a defeasance prepayment penalty.<br /><br />You can find hundreds of fixed rate commercial lenders, many of whom have either small prepayment penalties or none at all, by using C-Loans.com.<br /></p> 9 application/xml false commercial construction lender commercial construction loan commercial financing commercial loan commercial mortgage commercial real estate loan mezzanine lender mezzanine loan preferred equity C-Loans Commercial Mortgage Lender Databank Find Hundreds of Fixed Rate Commercial Mortgage Lenders http://www.c-loans.com/onlineapp Mozilla/4.0 (compatible; MSIE 7.0; Windows NT 5.1; .NET CLR 1.1.4322; .NET CLR 2.0.50727) 127.0.0.1 127.0.0.1 johngaudio 216.87.92.57 false true false false true 198508 false false true false false false true 78777 blog blogsite/CLoans/web