Updated almost 5 years ago on . Most recent reply
What's the incentive for paying off a cheap loan?
I'm buying a vacation rental property and have a private funder who will loan me the money at 5% for 10 years. He's flexible on payment terms so it's on me to suggest something. Monthly P&I payments amortized over 10 years would likely give the property a negative cashflow. So I've considered suggesting interest-only payments then a balloon payment at the end of the 10 years. Is that definitely the way to go or is there an argument for paying off some of the loan as I go along, say $10k a year or more? 5% seems like a good enough rate that I'm not sure if I have incentive to pay down the loan before the balloon. Curious what others think...