What are Balloon Mortgages?
These types of mortgages are short-term loans that are fixed-rate and begin with low payments. Balloon Mortgages end with a single large payment for all remaining principal at the end of 5, 7, or 10 years. A balloon mortgage might be a good idea if you only plan to live in your home for a few years and want to keep your housing costs low. Balloon mortgages can be quite diffucult when the finaly payment comes around because you will be making interest payments on the loan. We normally advise that if you plan to remain in your home then you will probably want to refinance before your final payment comes due. Many balloon mortgages give you the option to refinance but not all and you need to speak with your lender before committing to refinancing.
5/25 Balloon Mortgage
The 5/25 Balloon Mortgage loan requires that you completely pay your remaining balances in a single payment after 5 years. Your monthly payment is calculated as if you will pay the loan off over 30 years.
The purpose of the 5/25 Balloon mortgage goes with the idea that you will sell your home or refinance on or before your balloon payment date.
Do temp workers need a 5/25 Balloon Mortgage? The 5/25 Balloon Mortgage is perfect for temporarily relocated workers or a family that is certain that they will not stay in their new home beyond a five year period. Unlike the five year Adjustable, 5/1 adjustable, and 5/25 two-steps programs which also offer a fixed rate for 5 years, the borrower often enjoys a lower interest rate for the 5/25 balloon mortgage because they are not obliging the lender to extend credit beyond the initial fixed period. Keep in mind that some balloon mortgages offer the borrower a conditional right to reset which effectively provides for an extension beyond the initial fixed period.
7/23 Balloon Mortgage
In a 7/23 balloon mortgage you are required to pay off your outstanding balance after just seven years with your monthly payment being based on a 30 year amortization schedule. The 7/23 balloon mortgage is a longer version of the 5/25 balloon mortgage. This loan is for families who wish to have the security of a 7 year fixed interest rate and plan to move before 7 years is up.
Before applying for a balloon mortgage make sure you check out helpful online calculators and tables and see if the rates are right for you. These types of balloon mortgages are most popular in Michigan and are found in some auto loans with special lenders.