financing secrets of a millionaire real estate investor.pdf

4/Working with Lenders 37
when times are hard and the property is vacant, you aren’t obligated
to make the higher payment.
Biweekly Mortgage Payment Programs
An entire multilevel marketing business has been
made out of the selling people the idea of a biweekly
mortgage program. Basically, if you pay
your loan every two weeks rather than monthly,
you make two extra payments per year. With the
additional payments going towards principal, the
debt amortizes faster. Before plunking down several
hundred dollars to a third party to do this for
you, ask your lender. Many lenders will set up a
direct deposit program from your bank account
for biweekly payments.
Balloon Mortgage
A balloon is a premature end to a loan’s life. For example, a loan
could call for interest-only payments for three years, then be due in
full at the end of three years. Or, a loan could be amortized over 30
years, with the principal balance remaining due in five years. When
the loan balloon payment becomes due, the borrower must pay the
full amount or face foreclosure.
A balloon provision can be risky for the borrower, but if used
with common sense, it may work effectively by satisfying the lender’s
needs. Balloon notes are often used by builders as a short-term financing
tool. These types of loans are also known as “bridge” or “mezzanine”
financing.