I have a potential agreement with my family in the works for a 2 year interest only payment loan with a balloon payment after refinancing..
My question is the way to calculate this? These are not real numbers just example to see if this is proper way to amortize an interest only loan.. Say the loan is for 100,000 @ 5%.. Is the monthly payment amount 5,000$ divided by 12 Correct for a payment of 416$??
I hope those are your terms as to only pay $416 per month is incredible. Most private lenders are charging 12% annual so for your example it would be $1,000 per month.
Yes, your calculation is right. But, it's not "amortizing" which would mean principle payments.
Months have different number of days. So the correct way to do it is daily interest of 5/365. Each month will have different interest depending on days (28, 30 or 31 days). Thats the way banks calculate it as do I for private loans, though of course there rate is much higher than 5%!