| 'Balloon' or 'reset' mortgages have received a lot of | | | | prepared. |
| attention in recent times. Not all of it positive! But, as | | | | Also, when considering a balloon reset mortgage, |
| with many things, there are pros and cons to balloon | | | | keep in mind that not all borrowers are eligible to |
| mortgages. | | | | reset their mortgage. There are certain conditions to |
| So what exactly is a balloon or reset mortgage? Well, | | | | meet. These include being the current occupant of |
| it's a type of home loan where you have payments | | | | the home and paying your monthly payments on |
| based on a 30-year schedule but do not have 30 | | | | time for an entire year prior to the balloon maturity |
| years to pay off the mortgage. Most balloon | | | | date. If you do not meet these requirements then |
| mortgages require the entire balance of the loan to | | | | you may be denied the reset on your mortgage. If |
| be paid off within 5 to 7 years from date of the loan. | | | | you are denied the reset and cannot come up with |
| Balloon mortgages can, however, be reset in which | | | | the balance of your home by the maturity date then |
| case you will start over in a new loan with the | | | | you could default on your home and face foreclosure. |
| current interest rate and another payment plan. The | | | | Of course, you can try and qualify for a different |
| payment will be based on a 30 year mortgage which | | | | type of loan or sell the home to avoid foreclosure. |
| will give you a lower monthly payment. Again, this | | | | All in all, a balloon rate mortgage may be a good |
| loan will also have a payoff date, if you cannot pay | | | | option if your financial situation is not relatively stable. |
| off the entire balance by that date, then you can | | | | If you think you will have difficulty paying off the |
| reset the loan again. | | | | entire balance of the loan in 5 to 7 years then you |
| The key advantage of a balloon or reset loan is the | | | | may be able to reset the mortgage. Just remember |
| ability to reset the loan if you can't repay the balance | | | | that resetting isn't guaranteed to everyone. If you |
| within 5 to 7 years. These types of mortgages also | | | | cannot make your full payments on time for an |
| come with a lower interest rate than most mortgage | | | | entire year, or if you have rented out the property, |
| loans and you might qualify for a larger amount of | | | | then you may not be able to reset the loan. So, |
| money with this type of loan. However, the reset | | | | before you take out a reset mortgage be sure to |
| rate may be significantly higher than the original rate, | | | | consult your mortgage planner. |
| which can come as a nasty shock if you aren't | | | | |