PML Calculation for Interest payments and Payoff needed

[Gail Shulski]

I'm about to close a deal with a PML for $150,000, 12%, and 2 points.  I'm going to pay interest only for 6 months and then a balloon payment of the balance on the 7th month (after I'm able to refinance with a traditional loan).  Can anyone tell me what the Interest only payments would be each month and the balloon payment of the balance due in the 7th month?  I appreciate your help!!  Thank you!!  Gail

[Wayne Brooks]

Quote from @Brenden Mitchum:

Hey @Gail Shulski, welcome to the BP Community!

Your best bet would be to ask the PML just to double check everyone is on the same page. They should provide you with something that tells you what your monthly payment will be before closing.

That being said, the calculation is fairly simple. However, I am not sure if you're saying the purchase is $150k or if that's the loan amount. For the following calculations I'll assume $150k is the loan amount.

 12% of $150k is your annual interest-only payment. .12*150,000=18,000. So $18k is the amount you'd have to pay in interest for the year. Divide that by 12 to get your monthly payment. 18,000/12=1,500. So, $1500 should be your monthly interest-only payment. This is assuming you pay the points up front and don't wrap them into the loan. If you wrap them into the loan, just add 2% to $150k and work through the same calculations I just did. 

The balloon payment should be the loan amount minus 6 payments. 150,000-6*1,500=141,000. So, your balloon payment at month 7 should be $141k. Again, this will differ slightly if you wrapped points into the loan. 

I hope this helps a bit. Please, feel free to reach out anytime if you have other questions or just want to chat!

Not exactly….your interest Only payment calculation is correct, since the payments are interest Only, the loan balance hasn’t been reduced…it stays exactly the same, $150k