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Real Deal #142 – Balloon Note in Florida

September 10, 2008 by Tracy Z 1 Comment

Welcome to Note Investing Real Deals!  It’s always easier to learn from real life so here we share information from actual owner financed transactions. 

Today, we’re discussing a balloon note in Florida.

It was a nice home in Florida with the seller asking $234,000.  The buyer was eager to purchase the property and had saved almost 10% for a down payment.  There was only one problem. The buyer was unable to obtain a conventional mortgage loan due to some past credit issues, primarily attributed to medical bills.  Seller financing was the solution.

The Seller Financing Solution and Terms

Photo of Florida Skyline with words: "Real Deal #142 Balloon Note in Florida"

The seller agreed to accept payments from the buyer for five years.  This allowed the buyer sufficient time to correct the credit issues before seeking a refinancing loan to payoff the seller.  

The buyer put $22,000 down at closing and the seller carried back the balance of $212,000 at a 7.25% interest rate.  The buyer would make monthly payments of $1,391.72 for 5 years and then the full remaining balance became due.  The balance or balloon amount after 5 years would be approximately $204,010. 

Balloon Notes vs. Amortized Notes

When the last payment on a note is larger than the standard monthly payments, it is considered a balloon payment or a balloon note. An amortized note is when the monthly payments continue until the note is paid in full, with the last payment being pretty close to the same amount as the regular monthly payments. 

After receiving 15 monthly payments the seller desired to sell all future payments for cash now. The seller contacted a note broker that was able to place the note with an investor. The investor agreed to purchase the remaining 45 monthly payments plus the balloon payment with the seller receiving $176,016.

Prior to closing, the investor performed research on the note. This included a drive-by appraisal of the property value, verification of current taxes and insurance, title insurance, payment history, credit check on the payer, and review of documentation (note, mortgage, settlement statement, etc). When the investor’s due diligence was complete, the note and mortgage were assigned to the investor and the funds disbursed to the seller through an outside title company closing.

Real deals are based on actual transactions completed within the past ten years. Market conditions change frequently resulting in pricing and underwriting changes by note investors.  Work with qualified professionals when creating new notes to obtain accurate and up-to-date pricing and investment parameters. 

Additional Note Investing Resources

Interested in learning more about balloon notes or investing in mortgage notes? Check out these helpful resources and articles.

  • NoteInvestor.com Bookstore and Available Training Courses
  • 21 Tips to Read Before Investing in Notes
  • Note Investing 101 Series
  • Best of Notes 2020
  • Owner Financing – Why Balloon Payments are Good for Mortgage Notes
  • Owner Financing – Avoid 5 Balloon Mortgage Pitfalls

Filed Under: Real Deals Tagged With: balloon mortgage note, cash now for notes, How to sell a note, note investor, Note Seller Examples, Note Seller Real Deals, Owner financed real deal, sell mortgage, Sell Note, seller financed note example, seller financing

About Tracy Z

Tracy combines her knowledge of real estate notes with the power of marketing online to help grow your business! She can be reached at Tracy@NoteInvestor.com or by calling 1-888-999-7905.

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  1. Safe Real Estate Info » Blog Archive » Real Deal #142 – Balloon Note in Florida : Note Seller says:
    December 10, 2008 at 8:01 am

    […] TracyZ wrote an interesting post today onReal Deal #142 â?? Balloon Note in Florida : Note SellerHere’s a quick excerptTagged: balloon mortgage note, cash now for notes, How to sell a note, note investor, Note Seller Examples, Note Seller Real Deals, Owner financed real deal, sell mortgage, Sell Note, seller financed note example, seller financing … […]

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