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Balloon Loans and Terms

On our balloon loans, the amortization period of the loan is longer than the term of maturity, so what term should we use when calculating rate spread?

The term would be used. For example, in the case of a fixed-rate loan that has term to maturity of seven years and has a balloon payment because the payments are amortized over thirty years, the term of seven years must be used. In the case of a variable-rate loan that has a term to maturity of thirty years and whose rate is fixed for five years and then adjusts annually over twenty-five additional years, the term of five years must be used.


First published on 06/28/2010

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