There's been so much noise about IO loans--I'd like to know what you'd do in my shoes.

Background:
My wife and I run a solo medical practice. We also own the building in which she practices. The (medical) corporation rents from us--the commercial loan is ours.

The purchase price for the property is ~$175k, about ~$133k principal remains. The loan is fixed @ 7.0, amortized over 30 yrs. Friends in the real estate bidness say property is worth about 500k.

Because our situation has changed since we set up the practice, what was once a long term plan has become short term. That is, if we think the property has maxed its appreciation potential, we would consider selling. The corporation still operates out of this property, but it is no longer our main source of income.

Question is, in the current market, should I refinance for an interest only loan to keep payments low? If so, anyone in Chicago I can talk to?

Thanks.

Interest only loans seem attractive with low payments. More popular with residential properties, IO mortgages are something only recently applicable to commercial properties.

You IO rate is fixed for a short period and then it will start floating with a typical mortgage. What u have to be sure of is that the fixed rate period is equal to the prepay period. In short you dont want you rate to start floating or have the loan convert to a fully amortized loan before your prepayment penalties expire. i.e. after 2-3 years your monthly payments may jump and you wont be able to get out of the loan without paying a 5% prepayment penalty.

Long term, if yor prop has peaked in valuation, its prob best to sell it and take advantage of some of the high ltv programs (90-90% LTV) out there and aquire appreciating comm real estate. Leme know if you ahve any questions. Thanks, Naj!