Why has our bank changed our mortgage to a ONE YEAR LOAN?

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I have owned a business with my sister that has folded thanks to the lousy economy. It’s now for sale. Both she and I had gotten other jobs to pay the mortgage on our building, but we still asked the bank if there was a way to lower the mortgage payment until the building sold.

The bank agreed to lower it to an interest-only monthly loan, but they want our 20 year loan to now be a ONE YEAR LOAN, and we would owe the entire principal in a year!! Huh??

She and I can pay our mortgage payment until the building sells, but what if it doesn’t sell in a year?? We can’t come up with the entire principal!! Why are they doing that?? The bank loan officer said I could then reapply…but there’s no guarantees. They act like they WANT the building!!

Does this all sound reasonable and normal??
By the way, no I have not signed the new contract. It’s by reading it that I’m asking this question here.

And, I’m not sure I can go back to the 20 year? When I asked about it, he said since I’m not making income in the building, they would have “caught that eventually anyway” and would have had to retalk to us. He was very vague! If I’m making my payment every month, in spite of not using the building to do it, WHY would they have to “talk” to us?

I also find it WEIRD that they would only give us this new interest-only arrangement for one year! Why not two years so I can get the building sold??

Something doesn’t feel right about all this.
A question below was asked about tenants. My sister and I have been very willing to have tenants, but the three that have inquired have only wanted to rent the building for MUCH less than our mortgage. It’s been appalling. But…we know we may have to do that just to get some of our mortgage paid. Sad.

  1. Reply
    Jay S
    May 3, 2011 at 5:02 am

    So then you would want to keep the 20 year.

    Interest only’s to businesses are frequently short term and annually renewable. I doubt they really want the building in this market.

  2. Reply
    May 3, 2011 at 5:17 am

    With credit being tight that is the best the bank can give you. You could just keep the current 20 yr. loan and hope for a quick sale. At least this way you have 20 years to unload it.

  3. Reply
    May 3, 2011 at 5:57 am

    Sounds like you agreed for a one year interest only balloon loan. That is, at the end of the 12 mos you need to either refinance, or pay off the balance of the loan. Didn’t you read what the contract said? It should be laid out in the contract.

  4. Reply
    May 3, 2011 at 6:39 am

    If it’s a loan then you can pay it off anytime. In that case, if you suspect your bank of being less than ethical then decide with your feet. Find another bank that will treat you better. Banks are in it for the money, they don’t need your loyalty.

  5. Reply
    I Buy And Sell Houses
    May 3, 2011 at 6:52 am

    Yes. It sounds reasonable and normal.

    You’ve asked the bank to restructure the loan. They’ve come back with a proposal to restructure the loan. It’s a proposal that protects them, but then they’re in the driver’s seat.

    Also, they’re worried about what the market will look like in a year. They don’t want to be locked into a new 20-year loan, what with what’s happening now in the financial markets. And, yes, you have to take them on faith that you can reapply and perhaps get a better loan in a year. They’ll certainly let you, and if you meet their standards, you’ll get the loan. They really don’t want the building. That’s why they’re negotiating in the first place…so you don’t just default and they have to foreclose. They want you to keep owning the building. Really.

    Before you make a decision, check with a Realtor who specializes in commercial properties. Determine what the building reasonably would sell for today. Then price it at the bottom range of the Realtor’s estimate. You can buy time with the bank’s offer; then dump the building to get out from under. I certainly understand your concern that the building might not sell in a year. So you really have to determine its value today, then price it to sell.

    That’s your best option.

  6. Reply
    May 3, 2011 at 7:27 am

    Sound about right. If you need to renegotiate your terms, then they are basing it from today economical standpoint. What’s best for them.

  7. Reply
    May 3, 2011 at 7:37 am

    That is about what most banks will be doing to their very best clients. The one year deal might not be bad if they can guarantee a one year roll over say twice.

    That way you would have two rolls, they might be willing to do that since they would be able to get rid of the loan in 3 years.

    This is negotiations, you have to see what the best you can get as well as they are trying to get the best they can.

    They have not shut you out, they have made a counter offer. It is now time for you to make you counter offer in writing to them. Try two years and let them come back to you with a one year roll over.

    This would give you two-three years to sell the building.

    Trust me they do not want the building, they have enough residential as well as commercial properties on their REO list as it is.

    I hope this has been of some use to you,good luck.

    “FIGHT ON”

  8. Reply
    May 3, 2011 at 7:43 am

    i read that your biz closed. YOU did not say what you are doing
    to get tenants; since you are the landlord–owner of the biz.
    I am amazed that you did not discuss that part;

    are you preparing to leave the bldg empty during the
    rest of the time you pay on the mortgage?

  9. Reply
    Real Estate Guy
    May 3, 2011 at 8:22 am

    I would keep what you have.

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