Amortization

The most important aspect of the balloon program is how its amortization differs from its term. For example, the conforming five-year balloon has an amortization of 30 years and a term of five years. The monthly payments are calculated with a 30-year amortization; however, at the conclusion of the five-year term, the remaining loan balance must be paid off, converted or refinanced.

With the five-year balloon loan itemized in the following matrix, the loan amount of $100,000 has an interest rate of 7.500%, for monthly payments of $699.21. At the conclusion of the five-year term, the remaining loan balance will be $94,617. As you can see, the loan balance does not decrease very quickly during the first years of a 30-year amortization. This balance must be paid off, refinanced or, if applicable, converted.

Amortization table: 5-Year Balloon, $100,000 with an interest rate of 7.500%

1 Payment

Total Monthly

Principal Portion of

Interest Portion of

Current Balance 1

| Number

Payment

Payment

Payment

1

$699.21

$74.21

$625.00

$99,925.79

2

$699.21

$74.68

$624.54

$99,851.11

3

$699.21

$75.15

$624.07

$99,775.96

4

$699.21

$75.61

$623.60

$99,700.35

5

$699.21

$76.09

$623.13

$99,624.26

6

$699.21

$76.56

$622.65

$99,547.70

7

$699.21

$77.04

$622.17

$99,470.66

8

$699.21

$77.52

$621.69

$99,393.13

9

$699.21

$78.01

$621.21

$99,315.13

10

$699.21

$78.49

$620.72

$99,236.63

11

$699.21

$78.99

$620.23

$99,157.64

12

$699.21

$79.48

$619.74

$99,078.17

13

$699.21

$79.98

$619.24

$98,998.19

14

$699.21

$80.48

$618.74

$98,917.71

15

$699.21

$80.98

$618.24

$98,836.73

16

$699.21

$81.48

$617.73

$98,755.25

17

$699.21

$81.99

$617.22

$98,673.26

18

$699.21

$82.51

$616.71

$98,590.75

19

$699.21

$83.02

$616.19

$98,507.73

Was this article helpful?

0 0
Best Investment Tips and Ideas

Best Investment Tips and Ideas

The dynamics of investing can be very emotional and stressful if not properly managed. When you are aware of what is all involved you give yourself the power to avoid those situations or at least manage them effectively. That will make your investments more exciting, rewarding, and enjoyable. Those positive factors will only lead to greater success in all that achieve with investments and life.

Get My Free Ebook


Post a comment