QUOTE (PaulKlann @ Sep 15 2009, 10:35 AM) Thanks to you all for the great info. I checked with Olympia and they do not allow balloon payments at the mortgage maturity. Is there a Trust administrator that deals in Alberta arms length mortgages that allows for a one time payment at maturation? I note that this strategy is offered as one to maximize cash flow both at REIN and in Monte`s article in Canadian RE (June 09). Thanks for the help. Ciao,
Paul
Hi Paul,
Olympia does actually allow balloon payments, however, they also require a "market competitive" interest rate to be paid at least on an annual basis. Prime is currently at 2.25%, and when I asked "what is competitive?", they didn`t have a solid answer but gave a guideline of prime + ~1%. I believe it is there way of making sure the account remains "active".
With our last RRSP mortgage, we agreed on 10% annual interest rate for a 5 yr (open) term, with 4% due annually, and the remaining 6% to accrue and be paid as a balloon payment at the end of the term.
Hope this helps!