| A balloon mortgage loan can appear at first to | | | | balloon loans - they call them bullet loans. This is |
| strongly resemble a hybrid loan where the interest | | | | because at times where the balloon mortgage loan |
| rate is fixed for say 5, 7, or even ten years but then | | | | becomes due when high mortgage rates exist, it's like |
| the entire loan balance becomes due at the end of | | | | getting a bullet in the heart. Sound appealing? Not |
| this period. Borrowers are attracted to balloon loans | | | | really. |
| for much of the same reason they like their hybrid or | | | | Be mindful that refinancing a mortgage is never a |
| arm loan counterpart because balloon loans start at | | | | sure thing. Obtaining a balloon loan might look good |
| lower interest rates than fixed-rate mortgages. High | | | | for the short-term but may be disastrous down the |
| interest rate periods usually push buyers into balloon | | | | road. However, one situation where it's okay to |
| loans. If for some reason the buyer can't qualify for | | | | consider a balloon loan is if you cannot live without a |
| or afford the payments on a more traditional loan, | | | | property and this is the only type of loan option you |
| these other types of mortgages look appealing. | | | | have. If you decide to move forward with this type |
| Balloon loans can be very dangerous, because you | | | | of loan, you want to be absolutely sure that you can |
| could become trapped without a mortgage if for | | | | refinance when it becomes due even if you have to |
| some reason you are unable to refinance when the | | | | tap family members that could assist you in |
| balloon become due for payment. If you are in | | | | refinancing by loaning you some cash themselves or |
| situation where you have lost your job, or the value | | | | co-signing for the new loan. You also want to be sure |
| of your property falls or even a drop of your income | | | | to buy yourself some time if you take a balloon loan |
| occurs in some way, you may have problems | | | | taking a term for maybe 7-10 years if possible so |
| refinancing. The appraisal could come in to low or | | | | that you can get your finances in place. A balloon |
| interest rates could increase to the point where you | | | | mortgage loan can be a good friend in certain |
| cannot qualify for them - this could cause some | | | | situations but they obviously carry more risks than |
| serious problems. | | | | other types of loans so be careful. |
| Real estate industry insiders have another name for | | | | |