I have used a 25 year amortization schedule with a 5 year balloon, as well as a 15 year amortization with a 3 year balloon and attached them to the contract. It seems best to mirror conventional banking scenarios, i.e. what terms the banks might offer: 10 year, 15, 20,25,30 or 35,
depending on the property type and other factors.
The value in balloons is that it allows the principals to renegotiate the rate and/or terms at the balloon due date in order to accommodate current market conditions, or simply get paid in full at the time.
The notes seem to be more marketable with the balloons structure, in case the note holder is considering selling the note.
Aug 4, 2011