Balloon Mortgage to Finance Rental?

4 Replies

I have been looking for the easiest way to finance my first rental property and I wanted to see if anyone has experience with Balloon Mortgages. I have a bank that will give me a ARV loan up to 85%, the 1st twelve months are interest only, and down payment is rolled into the ARV loan. After 12 months it swaps to a 5 year loan 20 year amortized. Bank says I can refinance at any time. Anyone used this strategy? I just feel like their is a big catch with this.

Originally posted by @Allen Smith :

I have been looking for the easiest way to finance my first rental property and I wanted to see if anyone has experience with Balloon Mortgages. I have a bank that will give me a ARV loan up to 85%, the 1st twelve months are interest only, and down payment is rolled into the ARV loan. After 12 months it swaps to a 5 year loan 20 year amortized. Bank says I can refinance at any time. Anyone used this strategy? I just feel like their is a big catch with this.

If you're looking for more of a creative product that's not conventional for the myriad reasons why people don't qualify for conventional financing for a rental property try this:

Hard money loan that's interest only at 80% of the purchase price (since it's your first rental property, 80% is the most realistic ltv that doesn't have outrageous interest and points) and 100% of any rehab paid in draws.  Then, once you've acquired the property and stabilized it (meaning all construction is complete and there are tenants), refinance  based off of the new appraised value to 70% if you're within the first 90 days or 75% if 90 days has elapsed since acquisition; all with no income verification.  Yes, cash out is allowed.  30 year fixed is normal on these to help with cash flow and all with no balloon.

Stephanie