Are Balloon Mortgages Full of Hot Air

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					Are Balloon Mortgages Full of Hot Air?
Mortgages have many different aspects. Each type of mortgage will fit into one’s life
either for better or worse. Before investing in a certain type of mortgage, it is best to
know what qualifies you for the mortgage and what the regulations are on receiving the
money. One of these types of mortgages is a balloon mortgage. A balloon mortgage is
one where there is a large, lump sum payment due at the end of a series of smaller
periodic payments. These are usually included in loans or leases at the end of the term in
which you are paying them for. Most balloon payments are acquired when refinancing or
when one is expecting cash windfall from something such as inherited money, a large tax
refund, or an expected dividend. There are several different advantages and draw backs
to balloon mortgages. Depending on the type of loan that you need and how you wish to
pay this loan off, a balloon mortgage may or may not be the right choice in taking out a
loan.

The first advantage of a balloon mortgage is that the down payment is often lower
than that required for a conventional mortgage. Another advantage is that balloon
mortgages generally come with lower interest payments, which causes little capital
outlay. If you choose this mortgage, you will be able to have more flexibility to advance
capital during the mortgage. A third benefit is that the monthly payments will be much
lower than they would if you didn’t have a balloon payment. It is also possible to convert
a balloon mortgage into smaller payments at any time during your loan if the money that
you may receive is not going to come through. It is important to make sure that this is an
option before you begin a balloon mortgage. Another benefit to balloon mortgages are
that the interest rates will not adjust when interest rates increase on a national level.
Once the rate is set, it will stay where it is.

One of the disadvantages associated with a balloon mortgage is that the final
payment will usually be very large. You will have to be careful and decide whether to
make an investment in a balloon mortgage, especially if you do not know if there will be
money coming in at a certain time. Another disadvantage of a balloon mortgage is that
the refinancing costs could become a larger challenge and cost much more than expected
in the end. If the interest rates increase while you are in a balloon payment, you will end
up paying additional interest costs when wanting to refinance. If interest rates rise more
than five percent above the balloon interest rate that you began with, you will have to re-
qualify for a mortgage and have your home reappraised. This will end up costing you
more money in the end than you were trying to save. This is risky because of the
fluctuation that happens with interest rates on a consistent basis. If you catch things at
the wrong time, you will have to start the process of taking out a mortgage from the very
beginning, which will end up costing you more.

Before getting a balloon mortgage it is important to check on a number of variables,
including the interest rate which you will start out with, when you will owe the
balance, the refinance options available, whether you will be able to change your
balloon payment to a regular payment and whether you will have to re-qualify for a
mortgage when the final payments are due. If you get into a balloon mortgage, it is
important to know that you will be able to get the fixed amount by the time the final
balance is due. It is also important to look into what will happen after this payment is
due so that you don’t get caught in an endless cycle of having to take out mortgages for
your home. If these variables fit, then the disadvantages will be of no importance.

The time to get a balloon mortgage when you know that you will have end money,
are looking for lower interest rates or you know that you will be in the home for a
specific period of time. If these variables don’t add up, or it seems like a risk to get into
a balloon mortgage, than other mortgage and loan options must be looked into.

				
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posted:5/15/2012
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