| Balloon payments can be a nasty surprise for any | | | | you will be forced to refinance the loan. Refinancing |
| homeowner that does not fully understand their loan | | | | will cost you lender fees; however, if you are unable |
| contract. Here are the basics you need to understand | | | | to qualify for a new mortgage you could lose your |
| about balloon payments and why you should avoid | | | | home to foreclosure. |
| them. | | | | Many homeowners used interest only loans of this |
| What are Balloon Payments? | | | | type because they could not qualify for a traditional |
| A balloon payment is simply a large sum of loan | | | | mortgage to purchase their dream home. These |
| principal due at a certain time. The balloon payment | | | | homeowners could not qualify for regular financing |
| can represent a portion or the entire balance of the | | | | then, and if their financial pictures have not improved, |
| loan principal. Balloon mortgages frequently come in | | | | how can they expect to qualify when the balloon |
| the form of interest only loans. These mortgages are | | | | payment is due? These people will lose their dream |
| attractive because of they are easy to loans to | | | | homes to foreclosure. |
| qualify for and have very low monthly payments. | | | | The lesson to be learned from these homeowners is |
| The problem with an interest only mortgage of this | | | | simple. Do not purchase more home than you can |
| type is that the balloon payment is due at the end of | | | | afford using risky financing. To learn more about |
| the mortgage term. Loans of this type are typically | | | | borrowing responsibly, register for a free mortgage |
| only for seven to ten years. At the end of this time | | | | guidebook. |
| the principal balance is due; if you don't have the cash | | | | |