| The Balloon mortgage is another type of loan | | | | new loan. |
| program available to real estate buyers, which has | | | | Balloon mortgages are not uncommon, and they allow |
| contract features that can be attractive to | | | | borrowers to obtain mortgages with lower monthly |
| borrowers, but also dangerous. The combined total | | | | payments because of the significant lump sum they |
| of all monthly bills paid on a Balloon loan will not equal | | | | have agreed to pay later. For those borrowers who |
| the total amount due on the loan by the end of the | | | | appropriately plan for such situations, the balloon loan |
| term, a scenario called Negative Amortization. | | | | can be a good advantage. For those borrowers who |
| Because there will still be accrued interest at the end | | | | do not plan for the balloon payment, or whose credit |
| of the loan term, this past due amount is considered | | | | becomes bad enough to prevent them from |
| "capitalized", and therefore added to the outstanding | | | | obtaining new financing, there could be significant risk |
| principle balance. When a buyer reaches the end of | | | | with this type of loan. |
| his mortgage loan term, the remaining principle is due | | | | So, a balloon mortgage needs to be considered with |
| immediately and in one lump sum. If the borrower | | | | caution. It can be very risky. Only consider this type |
| does not have enough cash on hand to cover the | | | | of mortgage if you are absolutely positive that you |
| amount of the balloon payment, then he must obtain | | | | will be able to refinance, sell your home or pay off |
| another loan for the balloon amount, or refinance the | | | | the mortgage well before the deadline. |
| mortgage to include the balloon payment into the | | | | |