Balloon Mortgages
5/25 Balloon Mortgage
Although your monthly payment is calculated as if you will pay off the loan over
30 years, this loan requires that you completely pay your remaining
balance (a significant percentage of your original loan amount) in a
single payment after 5 years. This loan may be suitable for those who
will sell their home or refinance on or before the balloon payment
date.
This loan could be suitable for temporarily relocated
workers or others who are certain they will not stay in their new home
beyond the 5-year period. Unlike the 5-Year Adjustable, 5/1 Adjustable,
and 5/25 Two-Step programs, which also offer a fixed rate for 5 years,
the borrower often enjoys a lower interest rate for this program
because the borrower is not obliging the lender to extend credit beyond
the initial fixed period.
Note: Some balloon programs offer the
borrower a Conditional Right to Reset, which effectively provides for
an extension beyond the initial fixed period.
7/23 Balloon Mortgage
This is a longer version of the 5/25 Balloon Mortgage. Your monthly payment
is calculated based on a 30-year amortization schedule, but you are
required to pay off your outstanding balance after 7 years.
This loan may be for you if you are certain you will be
moving or refinancing on or before the 7-year deadline and you wish to
have the security of a fixed payment amount during this period.
Note: Some balloon programs offer the
borrower a Conditional Right to Reset, which effectively provides for
an extension beyond the initial fixed period.
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