Balloon Mortgage
Purchasing a home is perhaps the most important financial action you will ever take in your entire life. It is important to be well informed about the options that are out there for you. Everyone’s financial situation are different, so it is important to find a mortgage that will suit your particular financial needs. Luckily, there are a multitude of mortgage plans out there to choose from. If you think the Balloon Mortgage may be a good option for you, continue reading to find out more about its advantages and disadvantages.
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Overview of the Balloon Mortgage
A Balloon Mortgage is probably the shortest term mortgage out of all the mortgages. The loan is usually five or seven years long. For that portion of the loan, you will pay low monthly rates. However, after the term is over, you will be expected to pay the entire balance. This is the only mortgage that offers such a unique payment plan.
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Common Questions: Advantages and Disadvantages of the Balloon Mortgage
- The main advantage for this mortgage is the limited amount of cash you will spend on interest. Even if your interest rate is on the high side, a high interest rate for seven years is better than a low interest rate for thirty years.
• Another great benefit of the Balloon Mortgage is that you can qualify for a more expensive home than you would otherwise not be able to afford.
• A Balloon Mortgage allows you to pay low monthly payments until your balloon payment is due.
• The main disadvantage that people encounter with the Balloon Mortgage is the balloon payment due at the end of the mortgage. If you find yourself unable to pay off your loan at that time, you could enter foreclosure. Of course you may also refinance at this time.
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