Paying off mortgage early with balloon payment on end

3 Replies

Details on my mortgage - 

Interest bearing Principle $197,000

Deferred Principle $95,440

Interest rate 4.7%

20 year loan with 18 years left.

I wanted to pay $7,000 extra a month for the Deferred Principle  but the lender company told me I cannot pay on the deferred principle while there is a interest principle and thats need to be paid off first.

So my question is if i put a extra $7000 a month on the interest principle and pay off that early would I still have the remaining years to make payments on the deferred principle?

Why pay it off?   

With $7K per month you could probably buy a rent property every 3 or 4 months.   It was going to take you over 40 months to pay off that note which means a minimum of 10 rent properties during that same time frame, probably more like 12-15.  At that time, those properties could easily pay your mortgage payment.

@Fred W Johnson , sure, you could start paying out the deferred principal once the 20 year amortized principal is paid out early (based on what your Lender told you). 

You'd probably be a good candidate for refinancing into a 30 yr fixed (without balloon), wouldn't you? Then I agree with Greg, what's the urgency to pay out a low interest loan, when all the surplus money burning a hole in your pocket each month could be put to better investing use? 

Welcome to BP. All the best...

I couldn't agree more with Brent and Greg! Those extra investments(extra payment on balloon) could be used to buy more properties, which can turn into a great return on investment.  A balloon mortgage that does not fully amortize over the term of the note, leaving a balance due at maturity, so placing those extra investments (7,000 extra payment) in a better place would be more beneficial for you. Where the market is today, would be great time to take advantage for refinancing!