Mortgage Loans 101: What's A Balloon Loan?

When purchasing a home and assess the options for mortgage loans is likely to encounter the term "balloon loan". This type of loan allows you to make fixed payments for a certain period of time, but then are asked to pay the balance in one payment of a lump sum payment. Balloon Loan Key points: * The interest rate on mortgages balloon is almost always lower than the interest rate on a traditional 15 - or 30-mortgage years. This is the main advantage offered by this type of loan. * The result of the lower interest rate, of course, is a lower overall payment per month. * Balloon mortgages usually have a duration of five to seven years. After that, you must pay the balance in full (or to refinance or pay out of pocket). * Some balloon loans may be converted to a fixed rate mortgage loan at the end of the original term. In such cases, the fixed rate loan will have on interest rates in effect at the time of conversion. * A balloon loan can be a good idea if you only plan to stay in a house five to seven years. You can save money every month, and if you sell the house before the term expires, you avoid paying a lump sum payment. Before deciding whether or not a balloon loan is right for you, you should educate yourself on all loan types. It 'also a good idea to seek the advice of a qualified professional guides predictable. Conclusion: If you only plan to stay in a house for a few years, a balloon loan might be a good option for you. In most cases, a balloon loan offer interest rates lower than the conventional, long-term loan. Educate yourself before choosing a balloon loan, and be sure to have a plan in place for when the loan ends. Always seek the advice of a qualified mortgage professional. * Copyright 2006, Brandon Cornett.