balloon mortgage lenders

This video explains what a balloon mortgage is and provides an example to illustrate how balloon mortgages work. The video also discusses how balloon mortgages compare to ARM loans, and how.

Advantages & Disadvantages of Balloon Mortgages. A balloon mortgage is short-term home loan that resembles a traditional fixed mortgage. However, unlike a fixed mortgage, a balloon mortgage is not paid off at the end of its term: the mortgage holder must instead make a large payment to cover the remainder of the principal.

Even though a balloon mortgage and its low monthly payments can be tempting, you should use extreme caution before considering one. As you can see, mortgages with a balloon payment tend to have lower interest rates, and therefore lower monthly payments than other types of mortgages-without the uncertainty of an adjustable interest rate. And because of this, borrowers may be able to qualify for higher loan amounts with a balloon mortgage than they otherwise would.

Balloon Mortgages 5/25 balloon mortgage. Although your monthly payment is calculated as if you will pay off the loan over 30 years, this loan requires that you completely pay your remaining balance (a significant percentage of your original loan amount) in a single payment after 5 years.

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Risks With Balloon Mortgages. Balloon mortgages are mortgage loans that are amortized over 20 to 30 years. These loans are only good for three, five, seven, or ten years. When the term comes up, the whole balloon loan balance is due. Balloon mortgage loan borrowers need either to pay off the balloon mortgage loan balance in full or need to.

How a balloon mortgage works. A balloon mortgage is pretty much like a typical mortgage except for the end of the story. Suppose you can get a $200,000 mortgage at 4.25 percent over 30 years. The monthly payment for principal and interest is $983.88. At the end of the loan term, you owe nothing to the lender.

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Some balloon mortgage lenders charge the borrower points in exchange for a lower interest rate. One point represents 1 percent of the loan and lenders may charge 0 to 2 points, which are a one-time fee paid during closing.