Maturity is the date the loan must be repaid in full, regardless of how the property is performing. It is fixed at closing and it does not move with the market. On that date the owner refinances, sells, or pays the balance, and the terms available to him are whatever the market offers that week.
- It is the single most under-modelled date in small commercial real estate. The rate gets quoted constantly and the date almost never does.
- Refinance capacity is set by income and the rate of the moment, so a flat building in a higher-rate market supports a smaller loan.
- Start the refinance or the sale a year out. Options narrow quickly inside ninety days of maturity, and lenders price urgency.
- When buying, read the seller's maturity. It explains the timing better than any conversation will.
The same loan maturing with $947,300 outstanding, refinanced at 7.5% over 30 years, sized to the same 1.25 coverage on unchanged NOI.
Nothing happened at the property. The loan matured into a higher rate, and the shortfall is due in cash on a date set years earlier.
Related terms
All termsBalloon Payment
A balloon payment is the unamortised balance that comes due in one sum when a loan reaches the end of its term.
FinanceDSCR (Debt Service Coverage Ratio)
The debt service coverage ratio is net operating income divided by the annual loan payment.
FinanceAmortization
Amortization is the schedule by which a loan is repaid through level payments that cover interest first and principal second.
Terms arrive with the writing.
The glossary grows as the Journal does, one email when something worth reading goes up. No noise.
Unsubscribe anytime. See our Privacy Policy.