What is the standard amortization period for a commercial real estate loan?

• A. 20 years
• B. 25 years
• C. 30 years
• D. 40 years

Answer: (C)

Amortization period is the length of time over which loan payments are calculated to fully repay the principal. In commercial real estate lending, lenders typically set amortization around 25 to 30 years, with 30 years being the most common. This strikes a balance: it keeps monthly payments affordable relative to property cash flow, while still allowing principal to be recovered over a long horizon. Shorter amortizations, like 20 years, push higher payments and can stress debt service coverage; longer amortizations, such as 40 years, are less common because they spread payments thinner and can increase total interest and risk. Many CRE loans also have maturities shorter than the amortization, creating a balloon payment at the end, which is another reason 30-year amortization is a practical, standard choice.