It seems I've overlooked one aspect of modeling partial I/O in excel and wanted to double check with everyone.
given a 30-year amortizing loan with any amount of period of I/O greater than 0, assuming term is irrelevant the loan amortization table from the above would not have a 0 End of Balance in period 360?
Does this make sense. Or am I missing some interest or principal catchup device
I've seen a balloon payment due at end of IO period and end of term (360 mo). I have very little experience with this and would wait to hear others though..
They only use the 30 Amort to size up the loan, you will have a balloon payment due at the end. Usually your loan would have expired by then anyway and you would be required to have refinanced in the meantime.
As others have said, most likely a balloon payment, but it will rarely ever, if ever, get to that point. You would put permanent debt on it before the I/O period ends, usually at a lower interest rate and/or without a personal guarantee.
appreciate the answers. It is how I have been modeling it, but finally got a deal that did not give a loan term, so I had to check.
What others may have missed that you may be asking is if you should start counting th amortization schedule during the I/O or after, so the question becomes if you have a 30-yr amortization loan w/ 3 yrs I/O, does the loan fully amortize in 30-yrs from loan origination or 27-yrs?
The answer to that is "it depends" but more often than not, I've seen the loan amortization start after the I/O period. Thus, a 3-yr I/O, 30-yr amortization would take 396 mths to fully draw to 0 balance.
Guys you need to realize that logic drives a deal and not an excel model. Think basically. Once the loan matures, regardless of what your amortization table tells you, the borrower is obligated to repay the full balance of the loan otherwise he will be in default and the lender can assess penalties or initiate foreclosure on its collateral. It doesn't matter what your amortization table in excel tells you. This is why in real life, the borrower will make a balloon payment upon maturity, or if allowed, execute an option to extend the loan if he cannot repay at that time and likely pay a fee for the extension since it's an option inured to the borrower's benefit.
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