Balloon payment mortgages are fixed-rate home loans that require small monthly payments for a certain period of time and one large payment at the end of the loan term. Balloon mortgages normally start out like traditional mortgages. You make equal monthly payments according to a schedule calculated as if it were a long-term mortgage, but in actuality, the loan is really short-term. At some point, usually three, five, or seven years into the life of the loan, you'll be required to pay off the entire remaining balance of the loan. The lender may, but isn't obligated to, refinance the remaining amount on your loan at that time. If refinancing is chosen, keep in mind that the terms and interest rate are subject to the prevailing rates at the time. Also, there might be a minimal processing fee to obtain the new loan. The main advantages to obtaining balloon mortgages are that they offer very low interest rates for that initial period of time before the entire balance is due and they carry full tax benefits.
©2006 Crossroads Mobile. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
