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Balloon Payment

How do I enter a balloon mortgage?

Investment property - Basis: $400,000, Market $300,000, Current Mortgage $225,000, Interest Only $2100 month, Balloon due 7/31/2014.

1

You can't directly, we don't handle balloons.

You'll have to figure out the cash flows on the side and use the special expense mechanism to deal with it.

So, for example, investment property as above, no mortgage.

$2100/month special expenditures, tax deductible to handle the interest payments.

$225000 special expenditure in 2014 to cover the balloon.

I think this gets it for you.

Best,

Dick Munroe

2

I think I am reading this correctly...while you call it a balloon, in reality, it is an early payoff of a mortgage. Am I still correct that you don't handle this? This surprises me....I think paying down the mortgage is such a basic concept in retirement planning, that I can't believe you don't handle the option.
If I am correct, then your solution above is to show your monthly payments as special expenses and then the payoff as a once time special expense. I guess this messes up your net worth and I guess you would have to dummy the system to show primary real estate with no mortgage....dummy value as your equity with no mortgage.
Am I close....
Sure sounds like a lot of fooling around for a very common pre-retirement practice.
Thanks
Dave

3

The alternative is to adjust your mortgage time to the point where you are going to pay it off.

Best,

Dick Munroe