On May 17, the central bank and the State Administration of Financial Supervision released a big move in the property market, and the minimum down payment ratio for the first house was reduced to 15%, and the second house was reduced to 25%. Since then, various localities have adjusted their mortgage policies, and even Guangzhou has left the face of first-tier cities and lowered the down payment ratio of first and second homes to the lower limit stipulated by the state.
A house of 1 million yuan can be purchased for only 150,000 yuan, and the remaining 850,000 yuan is all borrowed? In theory, this is true, but in practice it is not so simple, because although the loan interest rate has also fallen, the monthly payment will still increase after the down payment is significantly reduced, and it is still impossible for people with low monthly incomes to use sufficient leverage.
Where there is demand, there will be supply, don't you think the pressure of monthly payment is high? The empathetic bank immediately came up with a solution for the customer, and the "balloon loan" reappeared after a two-year hiatus.
Recently, a joint-stock bank has publicly promoted mortgage loan products and special repayment methods on its official WeChat, including the protagonist of this article, "Balloon Loan". What is a "balloon loan" and why can it solve the problem that buyers cannot afford to pay their monthly payments? Let's talk about it briefly.
First, the "balloon loan" is not a loan shark, don't associate the two together, it is a repayment method that starts with a small monthly payment and suddenly becomes a large repayment in the last few years or a year. Isn't it similar to a balloon, blowing slowly, the balloon gets bigger and bigger, and finally it becomes the largest.
Second, the "balloon loan" can indeed reduce the pressure of repayment at the beginning, but a lot of money has to be repaid in the last year or period. This may not be easy to understand, so I'll give you an example.
For example, Li Si bought a house of 1 million yuan, with a down payment of 150,000 yuan and a loan of 850,000 yuan, with a loan interest rate of 3.4% and a repayment period of 10 years.
Under the "Balloon Loan" repayment method, the first 9 years and 11 months will be repaid according to the repayment method of equal principal and interest for 20 years, and all the remaining principal will be repaid in a lump sum in the last month. Through calculation, it can be seen that the monthly repayment of 4,886.1 yuan in the previous 9 years and 11 months, and the principal of 500,000 yuan is still owed, and all the last month is repaid to the bank.
The monthly payment of each month under the conventional 10-year equal principal and interest repayment method is 9,673.2 yuan, which is almost twice the monthly repayment amount of the previous 9 years and 11 months of the "balloon loan" repayment method.
From this example, it is obvious that the repayment method of "balloon loan" has little repayment pressure at the beginning of the period, which solves the problem that the initial income is not enough to cover the monthly payment, and can borrow more principal. Of course, you need to make sure that you get a large sum of money in the last month of the loan term and pay back the remaining principal.
The "Balloon Loan" is suitable for two groups of people.
One is a buyer who has just graduated and has insufficient income. Normally, people's income is gradually rising, and the income of fresh graduates in their first job is often very low, and with the increase in seniority and the improvement of job skills, the income is getting higher and higher. What should I do if I want to buy a house as soon as possible and have a down payment, but the monthly flow cannot cover the monthly payment? This problem can be solved by "balloon loans".
The second is the buyer who wants to "get on the car" after the current down payment ratio declines. As mentioned earlier, the low down payment ratio lowers the threshold for buying a house but increases the pressure of monthly loan repayment, and the "balloon loan" solves this pain point, with low down payment and low interest rate, so that more people who could not reach the threshold of "getting on the bus" can buy a house with leverage, releasing the potential demand for buying a house.
After understanding the above content, you should be able to understand the "routine" of "balloon loan", which is different from loan sharks, and the more and more "balloon loans", in essence, it will use time to repay space, and put all the repayment pressure reduced in the early stage to the end, a bit like the "interest first" repayment method, that is, only the interest is repaid at the beginning, and the principal is repaid in the last installment.
The reason why the "balloon loan" was stopped a few years ago is that this repayment method has high requirements for the lender's future repayment ability, and it is necessary to ensure that a large amount of money can be received after a few years or the growth potential of the income is great, otherwise the pressure accumulated in the early stage will not only not dissipate, but will explode at the end and completely crush the lender's cash flow.
The purpose of reducing down payments and interest rates is to activate the real estate market and promote the increase in transaction volume, and the "balloon loan" can undoubtedly play a role in achieving this goal faster.
However, this repayment method also buries hidden dangers, if bank staff cannot be cautious in approval, or even turn a blind eye to lenders who are unable to repay in order to complete the credit task, then it may be difficult to end after the outbreak of risk concentration in the future, and even repeat the subprime mortgage crisis that occurred in the United States in 2008. The lender may find that the house that has been paid for almost 10 years with a down payment has ended up being auctioned off because the last installment of the principal has not been paid.
The bigger the balloon blows, the bigger it is, the higher the probability of it bursting, and you have to guard against it.