[Balloon Mortgage]
Balloon Mortgages are like Fixed-Rate Mortgages, but after the first few years, the entire loan balance comes due. With a fixed rate and fixed payments, a balloon mortgage can be useful if you're planning to move within a few years. Rates are generally lower than for other mortgages. At the end of that period, you must make a large "balloon" payment to finish paying off the mortgage, with the conditional right to refinance. A balloon mortgage may be suitable if you plan to sell or refinance your home within a few years and want a fixed, low monthly payment.
ADVANTAGES OF BALLOON MORTGAGES
- It's easier to qualify because it is effectively a short-term loan and the lender is taking less of a risk.
- It gives you several years of protection from rate increases.
- Your initial interest rate is generally lower than that on a fixed-rate loan.
DISADVANTAGES OF BALLOON MORTGAGES
- You must refinance or sell in a few years.
