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Message
5yr. Balloon Loan w/ 10yr. Amort. (Any hidden things I should worry about?)
Posted on 8/16/16 at 11:56 am
Posted on 8/16/16 at 11:56 am
Long story short, my wife and I have about $236,000 in student loan debt. My MBA and her MD. If we continue to follow our fairly strict budget, I should have that down to $205,000-$215,000 by next December. Currently, I pay interest only which is a little less than $1,000. I usually just pay $1,000 for even numbers. Then at the end of the month I pay an extra $3k when the budget is followed properly and I have the extra jingle.
The plan is for that note to become a five year note, though there was never anything officially said about what kind of 5-year note. I wanted to propose a 5-year balloon note with 10-year amortization. That would leave me with roughly a $2,000 - $2200/month note and then an extra $1800-$2000/month to apply to principle when money is flowing well; which it should be when my wife becomes an attending. Her income should at least triple, but the idea is to be able to pay it off with our current income levels and set money aside for having a child, etc...
TL;DR are there any problems I should expect to encounter with a balloon note, assuming my wife and I have very secure jobs?
The plan is for that note to become a five year note, though there was never anything officially said about what kind of 5-year note. I wanted to propose a 5-year balloon note with 10-year amortization. That would leave me with roughly a $2,000 - $2200/month note and then an extra $1800-$2000/month to apply to principle when money is flowing well; which it should be when my wife becomes an attending. Her income should at least triple, but the idea is to be able to pay it off with our current income levels and set money aside for having a child, etc...
TL;DR are there any problems I should expect to encounter with a balloon note, assuming my wife and I have very secure jobs?
This post was edited on 8/16/16 at 1:39 pm
6
Posted on 8/16/16 at 3:35 pm to TheWiz
Guess I'm good 
This post was edited on 8/16/16 at 3:36 pm
Posted on 8/16/16 at 5:27 pm to TheWiz
quote:
are there any problems I should expect to encounter with a balloon note
The curveball lif is gonna throw at you for having a perfectly laid out plan
Honestly I think you have done your homework and have a good plan.
Posted on 8/16/16 at 6:28 pm to TheWiz
quote:
TL;DR are there any problems I should expect to encounter with a balloon note, assuming my wife and I have very secure jobs?
I think the bank gives you an option to refi before the balloon payment. One of my properties is a 5 year fixed with balloon payment due next may. I'm probably going to refi to a 10 year amort.
Posted on 8/18/16 at 6:53 am to TheWiz
Balloon notes scare the shite out of me because you are essentially betting a great deal on unknown circumstances.
It looks like both you and your wife will be generating great income, why don't you go hire a financial advisor to manage this for you? Once the debt is cleared you can have them manage other aspects like your retirement investing as well. I employed one a couple years out of college when the cash from deployments was rolling in tax free and it was one of the best decisions I have ever made.
It looks like both you and your wife will be generating great income, why don't you go hire a financial advisor to manage this for you? Once the debt is cleared you can have them manage other aspects like your retirement investing as well. I employed one a couple years out of college when the cash from deployments was rolling in tax free and it was one of the best decisions I have ever made.
Posted on 8/18/16 at 4:10 pm to TheWiz
Any chance you could get a fully amortizing loan and not have to worry about refi on the balloon? My worry would be that interest rates really can't go anywhere but up and you are taking a chance on the refi at 5 years reflecting that.
If you could lock in a 10 yr rate for 100 more (give or take) basis points, I think it would be worth it, rather than the unknown of future interest rates.
If you could lock in a 10 yr rate for 100 more (give or take) basis points, I think it would be worth it, rather than the unknown of future interest rates.
Posted on 8/18/16 at 9:05 pm to TheWiz
Here's the wrench. Your wife decides she doesn't love her job and wants to do a fellowship. Happens a lot in primary care. You might have to move and she will not get the salary bump you expect (at least for another 2-4 years).
This post was edited on 8/19/16 at 8:57 am
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