From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1522 topics, 14445 posts — Last Post 04/23/14, 09:12PM

BiggerPockets Exclusive PRO Area

118 topics, 844 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

10983 topics, 86537 posts — Last Post 04/23/14, 09:32PM

Real Estate Success Stories

398 topics, 6208 posts — Last Post 04/23/14, 08:04PM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5992 topics, 47206 posts — Last Post 04/23/14, 08:43PM

Renters

650 topics, 5861 posts — Last Post 04/23/14, 07:39PM

Get Foreclosure Help - Help Stop Foreclosure Forum

317 topics, 2561 posts — Last Post 04/23/14, 08:28PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

658 topics, 6316 posts — Last Post 04/23/14, 09:50AM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3709 topics, 29742 posts — Last Post 04/23/14, 09:25PM

Real Estate Guru, Book & Course Reviews and Discussions

1139 topics, 11598 posts — Last Post 04/23/14, 02:31PM

Ask About A Real Estate Company

743 topics, 7344 posts — Last Post 04/22/14, 11:25PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5634 topics, 43953 posts — Last Post 04/23/14, 09:14PM

Rehabbing and House Flipping

3351 topics, 31097 posts — Last Post 04/23/14, 07:49PM

Real Estate Development & New Home Construction

554 topics, 4694 posts — Last Post 04/22/14, 09:17PM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

867 topics, 6692 posts — Last Post 04/22/14, 08:22PM

Rent to Own a.k.a. Lease Purchase, Lease Options

699 topics, 4937 posts — Last Post 04/23/14, 08:00PM

1031 Exchanges

143 topics, 1062 posts — Last Post 04/22/14, 03:21PM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1691 topics, 11313 posts — Last Post 04/22/14, 09:26PM

HUD, VA, and Tax Sales

416 topics, 3103 posts — Last Post 04/23/14, 02:29PM

REOs

1217 topics, 10603 posts — Last Post 04/23/14, 08:46PM

Short Sales

1539 topics, 13154 posts — Last Post 04/23/14, 08:25PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7248 topics, 71165 posts — Last Post 04/23/14, 08:50PM

Mobile Homes & Mobile Home Park Investing

639 topics, 5144 posts — Last Post 04/23/14, 07:57AM

Investor Basics

Starting Out

7732 topics, 60680 posts — Last Post 04/23/14, 09:27PM

Investor Psychology

431 topics, 6107 posts — Last Post 04/20/14, 06:04AM

General Real Estate Investing

4730 topics, 37324 posts — Last Post 04/23/14, 09:30PM

Real Estate Investor Marketing

1738 topics, 14148 posts — Last Post 04/23/14, 08:20PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1412 topics, 9004 posts — Last Post 04/23/14, 02:19PM

Multi-Family and Apartment Investing

1123 topics, 9393 posts — Last Post 04/23/14, 09:28PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

644 topics, 4911 posts — Last Post 04/23/14, 04:03PM

Business Basics

Goals, Business Plans & Entities

833 topics, 7585 posts — Last Post 04/23/14, 08:58PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2802 topics, 20136 posts — Last Post 04/23/14, 06:57PM

Property Insurance

311 topics, 2057 posts — Last Post 04/23/14, 01:20PM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2852 topics, 19844 posts — Last Post 04/23/14, 05:05PM

Creative Real Estate Financing

1220 topics, 8855 posts — Last Post 04/23/14, 05:22PM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1217 topics, 8026 posts — Last Post 04/23/14, 07:59PM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1931 posts — Last Post 04/23/14, 09:04PM

Contractors

269 topics, 1690 posts — Last Post 04/22/14, 07:33AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2016 topics, 11755 posts — Last Post 04/23/14, 08:44PM

Americans & International Real Estate

162 topics, 568 posts — Last Post 04/14/14, 11:19AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

65 topics, 439 posts — Last Post 04/22/14, 09:27AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15083 topics, 54127 posts — Last Post 04/23/14, 09:19PM

Real Estate Events and Happenings

168 topics, 2602 posts — Last Post 04/23/14, 09:26PM

Off-Topic

Off Topic

Off-Topic

2907 topics, 32443 posts — Last Post 04/23/14, 07:43PM

Housing News & Real Estate Market

920 topics, 8391 posts — Last Post 04/23/14, 02:43PM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

Forums » Tax Liens, Notes, Paper, & Cash Flows Discussion » How to calculate a promissory note with a balloon payment

How to calculate a promissory note with a balloon payment

8 posts by 3 users

Signup

Real Estate Investor · Savannah, Georgia


I have a property that I intend to carry the mortgage for. My exit strategy is to sell this note to a note buyer, so I am trying to write this in a way that they will appreciate.

Here are the numbers. Please tell me if you know how to calculate it?

100,000 purchase price
20,000 down payment
80,000 loan amount
10% interest rate amortized over
30 years
30,000 balloon payment in five years

What is the payment amount for this (not including taxes and insurance)?

Thank you!!!



SFR Investor · Wheat Ridge, Colorado


Payment on $80K at 10% for 30 years is $702.06. You can calculate that with a financial calculator or in Excel. In Excel, the formula is: -PMT(10%/12,30*12,80000)

After five years, the balance on the loan will be $77,259.46. You calculate that with the FV function:
=-FV(10%/12,5*12,-702.06,80000)

Not quite sure what your intention is after the $30K payment. Typically a balloon payment would mean the entire loan must be paid at that time. So a "five year balloon" would mean the loan is to be paid off after five years.

So, maybe you mean the payments continue at the same $702.06 payment after the $30K payment. If so, the question is how many payments remain. You would calculate that with the NPER (number of periods) function:
=NPER(10%/12,-702.06,47259.46)

The answer is 99 payments plus a partial payment would still need to be make.

If instead you meant you want the loan to only have $30K remaining balance after five years, then you need to use a shorter amortization than 30 years. In that case you would calculate the payment using the PMT function and a future value of $30K after five years. That payment is $1,312.35, which equates to a 85.5 month amortization period.


Jon Holdman, Flying Phoenix LLC


Real Estate Investor · Savannah, Georgia


Jon,

Thank you so much for the math lesson. Learned a lot about Excels functions.

I guess a better way to ask the question would be:

80,000 loan amount
10% int amortized over 30 years
with a balloon in 5 years.
Whatever that balloon balance might be at that point.

Thanks again, for the help!



SFR Investor · Wheat Ridge, Colorado


So, then its easy. Its just the $702.06 payment. The balloon payment doesn't change the monthly payment. The payment is determined only by the rate, loan amount and the amortization period. The balance after five years is $77,259.46.


Jon Holdman, Flying Phoenix LLC


Real Estate Investor · Savannah, Georgia


Thanks again.

So 702.06 per month for 60 months and the last payment of 77,259.46 as a balloon. Does this sound attractive for a note buyer?



Note Investor · Pasadena, California


Angela,

The appeal of this particular note would depend on the payor's credit score and his/her actual potential to come up with that balloon payment.


Loc R., Individual/Private Note Buyer
E-Mail: [email protected]
Telephone: 626-590-6828
I buy individual notes - all states, shapes & sizes.


Real Estate Investor · Savannah, Georgia


Would it make a difference if the borrower told the note buyer that they would be refinancing to pay off the loan by time the balloon is due?



Note Investor · Pasadena, California


No. If the payor refis, the investor still gets his/her balloon.


Loc R., Individual/Private Note Buyer
E-Mail: [email protected]
Telephone: 626-590-6828
I buy individual notes - all states, shapes & sizes.




Sign up