Seller Financing @ 2% with 15 year Balloon

[Akshay Bhaskaran]

Newbie here trying to learn Seller-Financing. 

So, I came across this deal in Texas, and here are the numbers:

Seller financing:
- Purchase Price: $285,000.00
- Down Payment: $40,000.00
- Interest Rate: 2%
- Amortization: 30 yrs
- Balloon Period: 180 months

Entry Fee:
- Down Payment: $40,000.00
- Assignment Fee: $5,000.00


I have done a bit of a research, and here is what I've understood:

Purchase price:     $285,000 
Down payment:    $40,000
Loan amount:       $245,000 
Term:                     30 years
Rate:                       2%

- So, I will keep paying the loan of $245,000 at a 2% interest rate (around $906 Principal + Interest) to the seller on a monthly basis
- At the end of 15 years, if I continue doing this, the loan balance would have become $140,723.46
- And, this full amount of $140K is the due to be paid back to the seller at this time. Is this what a Balloon period means?
- Also, I read that I can refinance it at the end of 15 years, but quite confused. Does it mean put some rehab on the property, force appreciate it, and do a cash-out refi? To pay back that $140K? 

Thanks in advance. 

[Jay Hurst]

Quote from @Akshay Bhaskaran:

Newbie here trying to learn Seller-Financing. 

So, I came across this deal in Texas, and here are the numbers:

Seller financing:
- Purchase Price: $285,000.00
- Down Payment: $40,000.00
- Interest Rate: 2%
- Amortization: 30 yrs
- Balloon Period: 180 months

Entry Fee:
- Down Payment: $40,000.00
- Assignment Fee: $5,000.00


I have done a bit of a research, and here is what I've understood:

Purchase price:     $285,000 
Down payment:    $40,000
Loan amount:       $245,000 
Term:                     30 years
Rate:                       2%

- So, I will keep paying the loan of $245,000 at a 2% interest rate (around $906 Principal + Interest) to the seller on a monthly basis
- At the end of 15 years, if I continue doing this, the loan balance would have become $140,723.46
- And, this full amount of $140K is the due to be paid back to the seller at this time. Is this what a Balloon period means?
- Also, I read that I can refinance it at the end of 15 years, but quite confused. Does it mean put some rehab on the property, force appreciate it, and do a cash-out refi? To pay back that $140K? 

Thanks in advance. 

You will want to make sure the value is not way over over stated because if it is not why in the world would a seller give you these terms?  But, to answer your questions:

1. yes, a balloon means what ever is due at that time is due in full. Typically the goal with a balloon note is to pay off the loan long before you get to the point either buy refinancing or selling but with a 2% rate you will not want to pay it off early.

2. and assuming the value, your credit ect will allow you to refi when the balloon is due you would just simply refinance what is due at current rates. The value today (assuming what you are paying for  is even close to true value and it does not decrease in value) is more then enough equity to simply refi the balance with no forced equity.