What is a typical feature of commercial mortgages?

In the context of commercial mortgages, a typical feature is that they are often structured as partially amortizing loans with a balloon payment. This means that during the term of the loan, the borrower pays only a portion of the principal along with interest, resulting in lower periodic payments. However, at the end of the loan term, a larger final payment, known as a balloon payment, is required to settle the remaining principal balance.

This structure is common in commercial real estate financing because it allows borrowers to manage cash flow more effectively in the short term, while also providing lenders with a scenario where they can secure higher yields through the balloon payment. The terms can be tailored with varying amortization periods and rates, which is another reason why this feature is prevalent in commercial mortgages.

Other features like being fully amortizing throughout the term or having very low interest rates are not characteristic of commercial mortgages, as these loans tend to reflect the risk associated with commercial properties, resulting in varying interest rates and amortization structures. Additionally, commercial mortgages are typically not issued for long-term periods exceeding 30 years, as they often have shorter terms aligned with business cycles and property value assessments.