“Sell or refinance” is a starting point. Explain what must happen, who is involved, and what you would do if timing changes.
Understand the amount due at maturity
Interest-only payments cover scheduled interest without paying down principal. If no principal has been repaid, the outstanding principal remains due at maturity, along with any other amounts owed under the loan documents.
Start your planning with that repayment amount. A smaller monthly payment does not mean a smaller final balance. Ask the financing team to explain the payment schedule and how any reserves or funded interest affect it.
Further reading: CFPB: Understanding a balloon payment.
Connect the exit to project milestones
For a sale, describe the intended buyer, the property’s expected condition at sale, and the marketing work needed. For a refinance, identify the expected financing type and what must be completed before a new lender can consider it.
Write down a short timeline with an owner for each step. For example: confirm the entitlement schedule, complete the required site work, begin sale or refinance discussions, and leave time for the replacement transaction to close. Distinguish completed milestones from assumptions.
Consider a slower or smaller outcome
Refinancing is not automatic. Available terms can change with the property’s value, market conditions, and the borrower’s position. A lower valuation or smaller new loan may leave a gap that needs another source of funds.
Consider what happens if a sale takes longer, an approval is delayed, or the next loan is smaller than expected. Identify what resources or alternative path could cover that gap. The OCC discusses these factors in its guidance on commercial refinance risk.
Further reading: OCC: Commercial lending refinance risk.
Keep the plan current
Review your progress during the loan term and raise changes early. A financing conversation is easier to organize when there is time to obtain updated information and evaluate the available choices.
Before closing, ask about maturity, prepayment, any extension option, and the conditions and costs attached to it. Do not treat an extension or a future refinance as committed unless the relevant written agreement establishes it. Include your proposed exit and timing in the initial request.
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