Commercial real estate loans range from 5-to-10 year terms, but are amortized up to a 25-year term. The longer the loan term, the less the monthly payment. However, a longer loan term means greater interest costs associated with the loan.
In a situation where a 5-year term was taken for a commercial loan (amortization period of twenty-five years), the investor would make monthly payments over the course of five years based upon the loan being paid off over twenty-five years. At the end of the five years, one balloon payment would need to be made in order to pay off the remaining balance of the loan in full.