Interest Only Loan in Question (interest rate, 2014, rate, refinance)

[floresm]

1 ) I have a 2nd lien real esae lien note that is due in December 31,2014.

The principal amount when note signed on December 2009 is $16,000.

Annual interest rate on unpaid principal from date 6.5 per annum
Annual interest rate on Matured, unpaid amounts 17% per annum

The terms of payment ( principa and interst )
Monthly payments in the amount of $139.52 including principal and accrued interest commencing January 1,2010 and continuing monthly until December 31,2014, when the entire principal balance and accrued interest shall be due in full.

Maker promises to pay to the order of payee at the place for payment and according to the terms of payment the principal amount plus interst at the rates stated above. All unpaid amounts shall be due by the final scheduled payment date.



2) I called the Payee to get a payoff thinking I can try to pay off the note now and was told I still owe $16,000 Because the note is Interest Only Note. I have read the contract and its states $139.52 including principal and accrued inteest. Am I correct in saying I owe less than $16,000 ? Is the payee Incorrect in saying I owe $16,000 and balance is in the $11,000 Range.

[sloppymeg]

If you have an interest only loan, you generally are ONLY paying interest each payment.

Can you not look at your most recent statement that shows how much principal remains? I think it will still be the full amount unless you have been paying more than the monthly payment amount.

It's pretty much exactly how interest only loans work.

You may be able to refinance that loan into a more traditional loan.

[CptnRn]

You should have received a tax statement from them annually showing how much of your payments were interest and any remaining balance.

[Austin97]

if it is an interest only loan, then your payment should be in the $85 range. Since you paid 139/month it is possible that you owe in the 13800 range.

However if it is an interest only loan they could have specified terms like if you overpay the overpayment actually goes towards future interest unless you specifically tell them to apply it to principle

[txgolfer130]

If you're paying only $139.52 and it states

Maker promises to pay to the order of payee at the place for payment and according to the terms of payment the principal amount plus interest at the rates stated above. All unpaid amounts shall be due by the final scheduled payment date

you are paying an interest-only note. Therefore the principal <the $16,000> is due as a balloon payment. Now, usually I/O notes have a reset date usually 25% of the way through the term where the payment increases to start re-capturing a larger percent of I/O, b/c the rest of the unpaid is put on top of the original balance. I'm not sure how yours is structured since it's a 2nd note, but it sounds like it's a straight year term. Most have soft pre-pay's after 2 years so that you can refinance out. I would for sure check on that. Otherwise, start preparing for that balloon payment.

[Trainwreck20]

Well, according to bankrate.com, you should only be paying about $87/month for an interest only loan, so something looks amiss.....

[jackmichigan]

Originally Posted by floresm

Annual interest rate on unpaid principal from date 6.5 per annum
Annual interest rate on Matured, unpaid amounts 17% per annum

The terms of payment ( principa and interst )
Monthly payments in the amount of $139.52 including principal and accrued interest commencing January 1,2010 and continuing monthly until December 31,2014, when the entire principal balance and accrued interest shall be due in full.

If you were paying $139.52/month and it was an interest-only loan, your annual interest rate would have been 10.464%.

If your interest rate truly was 6.5% per annum, the first month's interest would have been $86.67--and each successive month would have had a lower interest amount in line with the declining principal balance.

I'm not sure what "Matured, unpaid amounts" refers to, but something just doesn't add up.