Mortgages
Is the balloon mortgage right for you?
By Advantage Mortgage
Sep 3, 2005, 17:37

What is a balloon mortgage and When should i consider a balloon mortgage?

A balloon mortgage starts off like a normal fixed rate loan in that you agree to make a fixed monthly payment. While your payment may be figured based on a thirty year loan, you are agreeing that, after a predetermined time, usually 3 - 7 years, you will either pay off the remaining debt or apply for another loan. In some instance a fixed with balloon option may come with a lower interest rate, which is appealing to home buyers. Keep in mind that if your finances or credit deteriorate, it may be difficult to get the lender to refinance. when is the time to refinance, you may have to settle with higher interest rates than you could have recieved at the initial purchase.

So is the balloon mortgage always the way to go?

If you are certain to move due to a career transfer or if you foresee needing a bigger home due to needed space to raise family, a balloon mortgage may be for you. Because a balloon mortgage may come with a lower interest rate, it could be advantageous to someone about to come into a large amount of money, such as a trust or inheritance.

On the other side, if you are considering taking a balloon mortgage solely because of he lower interest rate, are you really prepared to come up with the remaining balance when the balloon to come up with the remaining balance when the balloon payment comes due? The question deserves careful consideration because you could be at risk of losing the property.


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