Amortization

Amortization is the scheduled paydown of loan principal over time. Each level payment is split between interest and principal, with the principal share growing as the balance falls. Commercial mortgages typically amortize over 20, 25, or 30 years — but almost never run that long. A "5/25" structure, for instance, sets payments as if the loan will run 25 years but requires full repayment at year five.

That mismatch between amortization period and maturity is the defining structural feature of CRE debt. Longer amortization means lower payments and better in-place cash flow but a larger balance left at maturity; shorter amortization builds equity faster at the cost of monthly cash flow. Borrowers negotiating a term sheet are really choosing where on that curve to sit — and how big a balloon they are willing to refinance later.

Amortization terms quoted by specific lenders ("25-year am, 10-year term on owner-occupied") appear in the observed-terms module of our lender profiles.