Amortization
Amortization is the schedule over which loan principal is paid down, typically 25–30 years for commercial mortgages. Because commercial loan terms are usually much shorter (5–10 years), the loan does not fully pay off during the term — the remaining balance is due as a balloon payment at maturity.
Longer amortization lowers the periodic payment, which raises DSCR and can support a larger loan. A 30-year schedule versus 25 years reduces annual debt service by roughly 7–8% at typical rates.
Some loans include interest-only periods — often the first one to five years — during which no principal is paid at all. IO boosts early cash flow but leaves a larger balloon.