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brie · Joined: 13 Nov 2009 Posts: 1 1.33 Dollars($)

What would be the amortization schedule that would be used for a 60 month balloon @ 5.5%. Buyer is putting 10% down. Owner financing for $180000.

Was considering a 60 month balloon @ 5.5% on a 30 year amortization schedule. This is a temporary loan until the buyer can refinance.

Not sure if this is the customary way to configure interest for a balloon loan. Don't want to charge too much interest.

Thanks for any feedback!

jerry · Posted: Mon Nov 16, 2009 5:39 am Post subject:

Hi brie,

You can use a 20, 25 or 30 year amortization schedule for a 5 year balloon mortgage. Once the mortgage is amortized for a longer period of time, the monthly payments remain low and affordable. After the initial 5 years are over, you can ask the borrower to refinance and pay off the outstanding mortgage balance. You can also include a reset option in the mortgage agreement. If the borrower cannot refinance the loan at the end of the 5th year, you can reset the interest at the current market rate and amortize the loan for the remainder of the amortization period.

Let's assume you use a 30 year amortization schedule for the 5 year ballon mortgage. Using the FRM calculator, I found at the end of the 60th month, the remaining balance on the loan will be $166429.09. The borrower can refinance the mortgage and pay off this balance. If a refinance is not possible, you can reset the interest rate at current market rate and re-amortize the loan over the next 25 years.

Thanks,

Jerry

eric1 · Posted: Mon Nov 16, 2009 6:19 am Post subject:

Brie,

I think you are being fair by offering only 5.5%. Use the calculator that Jerry referenced. If you would like one to keep offline, you can download my best mortgage calculator

Company	Loan Type	APR	Est. Pmt.
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Owner financing amortization