| To overcome the major challenges, homeowners are | | | | a specified period. This is one of the biggest |
| provided with different opportunities to get different | | | | advantages of this type of home loan. The fixed rates |
| home loans. You have the option to choose a loan | | | | and the low monthly payments will give you the |
| that is suitable for your capacity to pay. And one of | | | | needed peace of mind. That is because your |
| the most preferable choices available for you is a | | | | mortgage is predictable which will enable you to better |
| balloon mortgage. It is important that you understand | | | | manage your finances. |
| the features of this loan to determine if it is perfect for | | | | The typical fixed rate period for this type of loan is 5 |
| your situation. | | | | to 7 years. During this time, you will know the exact |
| What Is A Balloon Mortgage? | | | | amount that you have to set aside for the mortgage |
| A balloon mortgage combines the features of 30 year | | | | monthly. A balloon mortgage therefore will give you the |
| (or 15 year) conventional fixed rate home loan at a | | | | opportunity to save some cash. |
| lower start rate with a preset early payoff date. This | | | | The Disadvantages of a Balloon Mortgage |
| preset payoff date is the date when the loan comes | | | | A balloon loan however has some major risks that |
| due and payable in one lump sum often called a | | | | should not be taken for granted. One of the biggest |
| balloon payment...hence the same balloon mortgage. | | | | risks is the possibility of failing to get a suitable |
| Because of this preset early payoff date, a balloon | | | | refinancing loan when the mortgage becomes due. |
| loan has a serious disadvantage that fully amortized | | | | There are so many reasons why you might fail to |
| mortgage do not carry. Of course, in the US the | | | | secure a refinancing. |
| average home loan is retired via sale or refinance | | | | First of all, property values are very unstable. The |
| within 7 years anyway, so many advocates of balloon | | | | value of your home could decline drastically which will |
| loans are saying US borrowers are not taking | | | | prevent you from getting a new home loan. Another |
| advantage of the lower rate and are paying for time | | | | risk is the possibility of losing your job or your current |
| they never use. | | | | income may not be sufficient to qualify for a |
| When you get a balloon loan, you will be given a fixed | | | | refinancing or a new mortgage. These are the risk |
| period to pay the loan at specific interest rate. So you | | | | factors that must be considered before you apply for |
| will pay a fixed interest rate for the mortgage for | | | | a balloon type home loan. |
| either 5 years or 7 years. But after the fixed period, | | | | A balloon mortgage is a suitable loan option for many |
| the mortgage becomes due. If you want to stay in the | | | | homeowners. This type of mortgage however has |
| home, this means you have to refinance or get a | | | | certain risks that you must consider. If you are unable |
| different loan with interest rates subject to the current | | | | to get a new home loan when the balloon payment |
| market rates. The balloon mortgage therefore forcing | | | | becomes due, and the housing market in you location |
| decision making sometime in the future where housing | | | | will not allow you to sell for enough to cover the |
| and interest rate markets are unknown. | | | | existing mortgage, there is a good possibility that you |
| The Benefits of Balloon Mortgages | | | | could lose your home by the lender forced to |
| When you get a balloon mortgage, you will enjoy | | | | foreclose. |
| lower monthly payments with lower interest rates for | | | | |