Posted by Thomas Doty on March 27, 2001 at 10:37:43:
In a word, Yes. I try to make sure the balloon payment isn’t scheduled to be due until 3-5 years after closing. Once you’ve made all payments for that time period in a timely fashion, the banks look at you differently. The kicker is, they have to all be on time. Not too early, never more than 29 days late. Never. Also, try to get a discount from the note holder (seller if you go that route). For example, I am buying a triplex for $75,000. $66,500 financed through a local institutional lender, and $8500 in the form of a 2nd from the seller at 9% amortized over 15 years with the balloon due in 5 years. I will most likely make payments on the 2nd for about half the term that we agreed upon, then ask the seller if he would accept less than the agreed upon amount if I paid him off early. 9 times out of ten, they will take the discount rather than waiting it out. Note: make sure you don’t agree on prepayment penalties as part of the second mortgage. Hope I helped you out.
-Thomas