Monday, January 3, 2011

I need help understanding a bank loan!!!?

What is a "5 year ballon based on 15 year amortization" (at 8%) loan? We are buying land and this is what the bank is offering. I don't understand it. Please help!


Your loan has a base interest rate of 8%, your monthly payments are based on a 15 year amortization, however the loan comes due in 5 years. The balloon payment is due in 5 years. Generally the lender will renegotiate a new loan at the prevailing interest rate.

Example: Loan amount $25,000

Interest Rate 8%

Monthly Payment based on 15 year amortization $238.91

At the end of 5 years, your loan balance will be $19,798.49. You will have made 59 pmts of $238.91 for a total payment of $14,095.69 of which $5,201.51 is principal and $8,894.18 is interest.

You will then negotiate the repayment of the remaining balance of $19,798.49.

Good luck with your purchase

Go 2 a website name www.home and office loans.com

I don't understand everything but I do know that with a balloon loand you start off small then it increases over the years. I just don't know how often it does and how much.

well, a balloon is usually a lum sum, large payment so I'd ask them about it. Amortize means to liquidate a loan. I'm not sure it sounds like a good offer. Better check it out.

you pay so much each month up to a point. then you pay a HUGE amount (perhaps the loan balance).

Your banking representatives should be willing to explain this until you understand it. Don't feel intimidated. Go ask questions until you understand it.

I would urge you to understand that loan before you even think about signing the contract.

yes i have some tips which might explain it

Before U understand the loan, understand Money: The Money(m2) that Money(m1) makes, makes the money(m3) that money(??) makes_____this is the basic Capitalist Idea.

You better ask the Banker what it means, rather than getting an interpretation by someone here & save your A** !!

also try www.bankrate.com

For 5 years you will be paying off mosly the interest only. Almost 90-95% of your monthly payments go towards the interest.

Then after 5 years you would be paying off interest and principal

I was going to answer, but dale hit the nail on the head. You will have the payments of a 15 year loan, but the note will come due in 5 years. After 5 years, you will be required to pay the remaining balance or refinance it (usually into a construction loan at that time). This is how we usually structure our lot loans.

your loan is for 15 years but only a five year term

after 5 years you have to renew loan and it may be different interest rate or different length of time every time it is renewed

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