Learn to Profit from Notes with Paper Assets Capital
Our educational materials are set up to help you better understand everything you need to know about buying and selling notes.
What are balloon payments and how do they affect note values?
Lenders often write loans with a balloon payment attached. Simply put, the note is advertised as being a 30-year note but has a balloon payment (that is the balance of the note) due in 7 years. Today’s lending environment is not overly-friendly on balloon payments so we tend to not consider them when we value notes. Largely this is due to the uncertainty borrowers often face when they attempt to refinance a balloon mortgage. Therefore, it is often safer to value the note as if there were no balloon and instead the value is based on remaining payments.