BTV- balloon to value calculations

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Posted by Michael Morrongiello on November 17, 2008 at 12:49:56:

In Reply to: Don't do this... posted by Michael Morrongiello on November 16, 2008 at 21:12:56:

A Late night posting.... see corrections to mistake in above post.

The correct I/O interest only payments for a $95,000.00 Note @ 10% would be $791.67 per month NOT $833.33.

IF this $95,000.00 Note were to be written as an AMORTIZING Note over lets say a 300 month Amortization (25 years) @ 10%, the monthly installment of Principal & Interest would be $863.27 P & I

With a 120 month (10 year) future balloon payment maturity date the principal payment in 10 years would be $80,333.00 - thus the BTV- balloon to value level is now an acceptble 80% threshold WHEN the future balloon payment is triggered.

If that monthly installment is too high - the $95,000.00 note could written with an exact $800.00 per month P & I payment and interst rate of 9.04% along with the 120 month future balloon payment (now = $78,678.71) again under < the 80% BTV level.

You simply back into the calculating the interest rate on the note as follows:

N = 300
I = ? = 9.04
PV = $95,000.00
PMT = $800.00
FV = $78,678.71

Continued best to your success;
Michael Morrongiello
Paper Practioner
www.sunvestinc.com
Author of the following home study courses;

Paper Into Cash - The Convertible Currency - How to Effectively Create Marketable Real Estate Notes
&
The Unity of Real Estate & "Paper" - Advanced techniques for both the acquisition and disposition of properties using Real Estate "paper"

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