Checked out that new mixed-use project in Tempe and the loan terms they posted seem wild

They're advertising a 5-year fixed rate at 4.75% for a retail condo unit, but the fine print says it's only for the first $500k with a 25-year amortization. How is anyone supposed to make the numbers work on that with such a short term and low cap? What am I missing here, is this just a teaser rate to get people in the door?

2 comments

2 Comments

laura_lane4d ago

Probably just a teaser rate, right? The balloon payment at the end is gonna be huge.

noahpark4d ago

My buddy got caught in a deal like that last year. He was so focused on the low rate he didn't plan for the balloon payment. When the five years were up, he couldn't refinance because rates had jumped and the property didn't appraise high enough. He basically had to sell the place in a hurry just to cover the loan. These terms are a trap for people who don't run the full math. The bank gets their money back fast, and you're left holding the bag.