Is A Balloon Mortgage Really What You Want

Is A Balloon Mortgage Really What You Want



Is a​ Balloon Mortgage Really What you​ Want?
In these days of​ hustle and bustle,​ and everybody just generally being in​ a​ hurry,​ it​ is​ also true that you​ can get a​ mortgage that way,​ too .​
But the​ speed and the​ rush that may surround your getting a​ mortgage for that home that you​ wanted,​ may also have prevented you​ from finding out what you​ really got yourself into .​
Balloon mortgages are becoming more common,​ but are they as​ good as​ some claim? Here are some things you​ need to​ know about balloon mortgages before you​ sign your name to​ one of​ these contracts .​
Like other mortgages,​ a​ balloon mortgage is​ taken out for 30 years .​
One difference,​ though,​ is​ that it​ never fully amortizes .​
Typically,​ they will be required to​ be paid in​ full after only 5 or​ 7 years,​ but some also go for as​ long as​ 15 .​
Like a​ regular mortgage,​ the​ payments are based on​ the​ 30-year period in​ order that the​ payments would be the​ same .​
The difference comes in​ the​ balloon part .​
Just like balloons are large and can suddenly get in​ your way,​ so is​ a​ balloon mortgage .​
At the​ end of​ the​ 5,​ 7 or​ 15 years,​ when it​ becomes due,​ you​ owe the​ entire balance .​
Since most people cannot afford to​ hand over such large sums of​ money in​ such a​ short time,​ the​ mortgage will need to​ be refinanced,​ or​ you​ could sell the​ house in​ advance,​ or​ lose the​ house.
There is​ a​ guarantee,​ usually,​ in​ the​ contract stating that you​ can refinance .​
While this should provide a​ degree of​ comfort,​ you​ need to​ realize that if​ you​ refinance only when it​ is​ due,​ then you​ may be stuck with whatever the​ interest rate is​ at​ the​ time .​
It could be much higher,​ and your monthly payments much larger,​ too .​
In reality,​ though,​ the​ lender may not refinance if​ you​ just fail to​ be on​ time with even one payment in​ the​ last year before refinancing .​
If the​ interest rates,​ are high,​ you​ may not want to​ refinance .​
In either case,​ you​ risk losing the​ house.
Another problem is​ the​ amount of​ equity that you​ will have after the​ 5 or​ 7 year period .​
There will not be much equity built up,​ and that could leave you​ with a​ very bleak future because,​ even if​ you​ sell the​ house,​ you​ may not get enough for a​ serious downpayment on​ another one .​
If you​ plan on​ living there for any length of​ time,​ you​ are probably much better off with regular financing .​
One great advantage is​ that you​ can pick and choose a​ time when interest rates drop to​ be able to​ consider refinancing if​ you​ want,​ rather than being stuck on​ whatever the​ rates are when you​ must refinance .​
Besides that,​ you​ have a​ greater level of​ security for yourself and family in​ knowing that the​ rates are secure (unless you​ get an​ ARM).
A balloon mortgage does have a​ good customer,​ though,​ for someone who knows that they will not stay in​ an​ area but for a​ few years .​
The steady payments gives them an​ opportunity to​ have a​ house,​ reasonable payments,​ and will allow them to​ sell in​ time to​ be able to​ be able to​ avoid having to​ refinance in​ order to​ keep the​ house.




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