| Finally being able to buy your house because you got | | | | The advantage of getting a balloon mortgage is that |
| the mortgage you wanted is an exciting thing. Many | | | | it enables you to get lower than traditional mortgage |
| mortgage possibilities are available, but a balloon | | | | costs. Your payment will usually be a little less than if |
| mortgage may be the thing that you need to get | | | | you had a regular mortgage. This also means two |
| moved in. Here are some things you need to know | | | | things, though. First, it means that you are not paying |
| about balloon mortgages that will enable you to | | | | much more than interest in the brief time span of the |
| decide if this type of mortgage can help you. | | | | loan; and this also means that you really are not |
| A balloon mortgage is taken out for a 30-year period, | | | | building up much equity on the home during that time. |
| like an ordinary mortgage, but paid back much | | | | At the end of the specified time period, whether 5, |
| sooner. These are often paid back in 5 or 7 years, | | | | 7, 15 years, or some other arrangement, you must |
| but recently a 15-year option has become rather | | | | pay off the balance of the mortgage. A balloon |
| popular. At the end of this period of time, the | | | | mortgage will be of more value to you if you are |
| mortgage becomes fully due - it must be paid off. | | | | intending to sell the house before the balloon |
| Since most people cannot pay it off because the | | | | payment is due, or, plan to refinance. Refinancing, of |
| balance is still quite large, there is a guaranteed option | | | | course, means that you are forced to take a risk on |
| of refinancing - at the market rate at the time. | | | | whatever the new interest rates are at the time - |
| This makes a balloon mortgage in some ways both | | | | could be good or bad. There will be, in the initial |
| like a fixed rate mortgage and an adjustable rate | | | | contract, terms under which such a contract can be |
| mortgage (ARM). It is like a fixed rate mortgage in | | | | refinanced. This may be, however, non-negotiable. |
| that it has a fixed payment over a certain period of | | | | Which means, simply, that you are better off |
| time. On the other hand, a balloon mortgage is like an | | | | refinancing through another lending agency - in most |
| ARM because the guaranteed level of interest goes | | | | cases. |
| to an unknown rate - to whatever the interest rate | | | | A balloon mortgage works well with someone who |
| is when you refinance. | | | | knows that they may not be staying in an area for a |
| The monthly payment for a balloon mortgage is like | | | | long period of time. Another possibility is if you know |
| the payment for a fixed rate mortgage because it is | | | | you can take the balance of your lower payment, |
| based on the whole period of the loan - for 30 years. | | | | reinvest it in higher interest yielding products, and |
| All balloon mortgages are calculated on a 30-year | | | | then pay off the balloon mortgage at the end of the |
| time frame. The difference being that the full | | | | term. |
| payment is due earlier. | | | | |