| Mortgages come in many different types and, for | | | | payment in the last 12 months. |
| this reason - not every mortgage is designed to be | | | | A reset clause may also be attached. These are |
| able to meet everyone's needs. Balloon mortgages | | | | becoming more common. This enables you to |
| are certainly one of these that may not fit most | | | | convert the loan to make fully amortizing payments |
| people's needs, but have a great use for loans | | | | at the market rate of interest for the balance of the |
| needed for just a short term. Several loan types are | | | | 30-year loan. Since they are calculated on a 30-year |
| basically temporary loans but require a balloon | | | | basis, it would simply be for the remaining years. |
| payment at a specified time. Here are some | | | | Who Can Benefit? |
| situations where a balloon mortgage may be the ideal | | | | Several different types of people can actually benefit |
| one for you. | | | | from this type of loan. Here are some. |
| How They Work | | | | * People Looking To Buy Larger House |
| These typically have a period in which you make | | | | This may be a good option for those who simply |
| fixed rate payments for a number of years, and | | | | want to buy a larger house - larger than what they |
| then you are required to pay the balance in one lump | | | | can currently afford. Many sub prime lenders pushed |
| sum. Usually, your payments are less than necessary | | | | this option in recent years, however, and many are |
| for amortizing so that you can take advantage of a | | | | now losing their homes because of it. While it can |
| lower than normal payment. This lower payment | | | | work for a while, remember that it will catch up to |
| makes them attractive to people who may be | | | | you and a balloon payment is due at the end, which |
| looking to get a larger house than what they might | | | | will necessitate refinancing or selling. If you use this |
| be able to afford otherwise. | | | | option, you should be sure you will have that salary |
| Options At End Of Loan | | | | increase |
| At the end of the balloon mortgage term, you are | | | | * People Needing House For Short Term |
| required to fully pay it off. There is no way around it. | | | | Since these can be obtained for 3, 5, 7, 11 years of |
| Generally, this will leave you with three options. The | | | | more, this makes them flexible to fit your needs. If |
| first option would be to refinance and convert it to a | | | | you need to move to a city for just a couple of |
| fixed rate mortgage. This is probably the most | | | | years, then this could work good for you. Get a |
| common. A second option would be to sell the house | | | | balloon mortgage for a little longer than what you |
| before the balloon payment is due. A third option is | | | | intend to stay, and sell it before the balloon payment |
| to make large enough payments each month to fully | | | | becomes due. Remember that short-term |
| amortize the loan by the time it is due. | | | | mortgages, however, will not provide equity. |
| Balloon mortgages may contain a clause enabling you | | | | When you look around for your balloon mortgage, |
| a guarantee of being able to refinance. This will | | | | you should get quotes from various lenders. This will |
| depend, however, on your own credit rating at the | | | | show you what you could get in terms of interest |
| time, your income and outstanding debt. Many lenders | | | | rates, fees, and various other clauses. Watch out, |
| also have a clause in there that will allow them to | | | | though, for prepayment penalties. |
| negate the guarantee if you have made one late | | | | |