Land Loan Calculator
Land loans often work differently from home loans. Many have a short term, while the payments are worked out over a longer schedule, which leaves a large final balloon payment. This shows both.
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How it works
The amount financed is the price minus the down payment. The monthly payment is worked out over the full schedule length, using the standard loan formula and the yearly rate divided by twelve.
The balloon is what is still owed when the short term ends. It is the amount financed grown at the monthly rate, less the payments made, which gives the remaining balance at that point.
Worked example
On land priced at $80,000.00 with 20% down, the payment is $575.82 a month on a 20 year schedule. After 5 years, a balloon of $56,772.51 is still due.
Questions
What is a balloon payment?
It is a large payment due at the end of a short term, for the balance left after the regular payments. You may need to refinance or pay it in full.
Why are land loans set up this way?
Lenders often see land as riskier than a house, so they tend to ask for shorter terms and higher rates.
Should I plan for the balloon now?
Many people set money aside, or talk with a lender about refinancing, well before it comes due.
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