Balloon Mortgage

A Balloon Mortgage means that your interest rate will remain fixed for an established period of time, (usually seven years) with a lump sum or "balloon" due at the end. We offer a refinance at the balloon subject to certain conditions. This is a popular loan for borrowers who plan on holding the mortgage for a few years (3-7). The rate is lower than a fixed rate mortgage and the payment is based on a 30-year amortization.

Loan Features:

• Ideal if you plan to sell or refinance your home within seven years and want a low monthly payment during that time. The interest rate you pay on a balloon mortgage is usually lower than a comparable 30-year fixed-rate mortgage.
• With a refinance option at the end of seven years, you have a "safety net" in case a planned relocation doesn't take place or economic conditions prevent you from moving to a larger home. (You may want to understand all the conditions needed for a refinance before getting this loan.)
• You need not re-qualify for this loan when refinancing at the end of seven years as long as the new interest rate is not more than 5 percent above the current interest rate.
• A final "balloon" payment is required for the remaining balance of a mortgage. You may make small payments which will suit your financial condition.
• Generally balloon mortgages are available for 5 or 7 years. They are frequently described as a 5/25 or 7/23.These days 5/25 and 7/23 convertible balloon mortgages are getting more popular since they provide lower rates than conventional 30 year mortgages while still giving a fixed payment schedule for 5 or more years.
• Balloon mortgages are available even with 5% down payment. However, if you are making less than 20% down payment you will have to pay private mortgage insurance.

If you are looking for a lower rate of interest and are planning to stay in the house for a definite length of time then you might want to opt for a balloon mortgage.