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30
Ok cool. Thanks. I thought you might have to subtract the number of interest free years from the original amortization, so that the loan would actually be paid off in 30 years, if it was over a 30 yr term.
If you are looking for something to play around with, see below.
https://www.adventuresincre.com/3-tiered-debt-module/
30
As others have mentioned, itll be 30-years after the 5-year IO period. Playing around with the website Count Chocula posted should give you a good idea.
Lets say that you have the following loan terms:
Loan Amount: $1,000,000 Coupon / Interest Rate: 4.00% Amortization: 30-Years
Lets look at a few IO scenarios:
Under this scenario, the coupon payments by the borrower from the start (payment 1) will have a principal component to them. Using the website above or any amort. table/calculator, the ending balance (P&I) should be just under $800K (correct me if I'm wrong).
Same idea as above, except that the amortization schedule starts in year 5. In this case, the ending principal balance should be just under ~$910K.
In this case, the borrower never pays any principal (there is no amortization) and the loan's ending (principal) balance is still $1,000,000. Assuming this a Full LTV mortgage on a CRE property with no sub-debt (lets say 70%-80%), this means that cap rate and cash flows have to (at least) stay exactly the same as when the loan was made at the time or refinancing. Any deterioration in either would mean I) when time comes to refi the loan, the borrower will need to come out of pocket to pay off existing debt, II) there will be need to be sub-debt (but given this loan amount, dunno how this would happen) or III) the borrower hands back the keys to the lender.
Happy to edit/tweak if you guys think I left anything out/something isn't right.
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