In general, loan terms for commercial real estate financing are...

Loan terms for commercial real estate financing are typically shorter than those for residential financing. This is primarily due to the nature of commercial properties and the associated risks. Commercial loans usually have terms ranging from 5 to 20 years, and they can also have amortization periods that extend beyond the loan term, resulting in a balloon payment at the end.

In contrast, residential mortgages usually have longer terms, commonly spanning 15 to 30 years. Lenders assess commercial loans with a greater focus on the cash flow generated by the property, its location, the economic conditions affecting the real estate market, and potential tenant occupancy rates. These factors introduce a level of uncertainty that often leads lenders to offer shorter terms compared to residential loans, which are typically based on the borrower’s creditworthiness and income stability.

While terms can indeed vary based on property type in commercial real estate, the overarching trend shows that commercial financing typically involves shorter terms relative to residential financing, making this a clear distinction in the lending landscape.