Posted by Stacy (AZ) on January 26, 2001 at 11:18:29:

I thought she was asking about principal only payments, with a balloon in 10 years. If calculated at 30 years, payments would be loan amount divided by 360. Balloon payment at 10 years would be loan amount minus 10 years of payments.

$100,000 loan amount, over 30 years, principal only payments(0% interest)
payments 100,000/360 = 277.78
10 year balloon 100,000 - 33,333.33 = 66,666.67

Posted by Shenesa on January 25, 2001 at 10:20:40:

I need some clarification. When you offer to pay principle only with balloon pmt in 10 yrs, are you amoritizing a 30 yr mtg but paying it off in 10 yrs? Therefore causing a lower monthly pmt?

A 30 year loan or any loan that is fully amortized mean that the sum of the principle and interest is the same for each payment. Obviously the first payment is vast majority interest and the last is mainly principle.

The norm is to have interest only to make the payment a little lower then balloon it at 10 years. That would be all principle and the same as the original amount. You can also do it with a 30 year amortization(P&I) but the balance due at the future point-10Yr.

The investor would like the seller to take 0% interest so the loan amount would be divided by 120 to get the payment amount.

Posted by Stacy (AZ) on January 25, 2001 at 10:44:06:

Hi Shenesa-

Yes, you’d calculate the monthly payments based on 0% interest over whatever amortization term you agree on. Longer the better when you are the buyer. 20 or 30 years is typical. Then, when the balloon occurs, you’d be paying off whatever is left of the balance, subtracting the payments made over the prior 10 years.