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Balloon note
Posted on 10/20/25 at 3:46 pm
Posted on 10/20/25 at 3:46 pm
Buying land for a house construction in the future. Borrowing $34,000 at 7.25%. Banker said it has to be a balloon note for 8 years at $500 a month. Is this a good or bad idea?
4
Posted on 10/20/25 at 7:54 pm to tigger4ever
Yes. It just means if you haven’t paid it off at 7 years you’ll need to refi. Just make sure you talk to a few lenders.
Posted on 10/20/25 at 9:49 pm to TX_Tiger23
Or should I set the loan up to mature in a year hoping interest rates drop and then set up the balloon loan after that?
Posted on 10/20/25 at 10:08 pm to tigger4ever
Setting up a one year loan to possible save fifty bucks and repay closing costs wouldn’t make any sense.
Posted on 10/21/25 at 7:16 am to tigger4ever
Either pay it off cash before you take out your construction loan well before the balloon payment is due or let the construction loan lender pay it off and roll it into your construction loan. No one will finance a home build on land under a loan with a different lender. As long as you are planning to build before the balloon is due it shouldn’t be a problem.
Posted on 10/21/25 at 8:28 am to tigger4ever
at 500/mo on that all you are paying is interest. You should build as soon as you are financially able. All you are doing is renting the land until then with that loan. So, if you are ready to build in a year or so then go for it, and roll the lane loan into the construction loan and/or pay off the land loan before you finance the build. If you aren’t ready to build just be sure you are ok with basically throwing money away as you will have very little equity if something changes and you may wind up underwater
Posted on 10/21/25 at 11:32 am to tigger4ever
You can always pay it off early or refi should rates drop significantly. However, as others have said, I wouldn’t finance for a year hoping for rates to be a little lower.
Posted on 10/21/25 at 11:48 am to tigger4ever
Do you own your current home?
You may be able to do a heloc or personal loan also and get close to that. I’m knot really sure to be honest but I’d explore those options also. The only difference is you aren’t using the land as collateral which isn’t helping much here anyway.
You may be able to do a heloc or personal loan also and get close to that. I’m knot really sure to be honest but I’d explore those options also. The only difference is you aren’t using the land as collateral which isn’t helping much here anyway.
Posted on 10/21/25 at 5:33 pm to cgrand
quote:
at 500/mo on that all you are paying is interest.
Nah, rough math is he is paying about $2400/ year in interest and $6000 in payments so $3600 toward the loan.
7.25% doesn’t seem bad at all for raw land so I’d be shocked if he could beat it by much.
The thing to be careful on is to make dang sure you want to build on it. It’s not a personal residence so it’s treated as an investment until you move to it. So just keep that in mind in regards to taxes and expenses.
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