Maturity is a date set on which the life of a financial instrument or transaction ends. It can either be renewed or ceased completely. Commonly, this term is used to describe deposits, options, forward transactions and foreign exchange spots, commodity swaps and interest rates, and loans and fixed income instruments such as bonds.
In real estate, maturity refers to the date with which a mortgage matures or reaches the maturity date that is explicitly stated in a home loan promissory note. A borrower must make a final payment or settle the full amount on the maturity date.
For a balloon mortgage, a borrower will pay a significantly larger amount upon maturity of a mortgage. They can opt for alternatives, however, such as negotiating an extension or refinancing.
Some financial instruments such as loans and deposits actually require repayment of both the principal amount and the interest upon maturity. However, foreign exchange transactions would only ask that the delivery of a commodity is provided. Others, such as interest rate swaps, do involve a series of cash flows occurring until the date of maturity.
What happens if a borrower defaults on loan maturity?
A demand letter will be sent, demanding a full payment. Failure to make contact or work out an agreement with the lender will kickstart foreclosure actions. Upon closure, the property will be claimed by the bank or auctioned off.
Do Real Estate Investments Mature?
Unlike other forms of investment with fixed maturities, investing in real estate do not have fixed maturity dates. Therefore, individuals can immediately sell properties within a few days instead of putting it on hold for decades, providing a good source of income because of long-term asset appreciation.