Refinancing has proven to be a lifesaver for various reasons and for many people. If you’ve a balloon mortgage coming due, refinancing may also be your salvation.
What Are Balloon Mortgages?
Balloon mortgages are essentially short-term loans. When you acquire a balloon mortgage, your monthly payment and interest rates are based on thirty-year loan amortization schedules. That sounds good, doesn’t it? But keep in mind that these are short-term loans; they usually cover five to seven years and on the final payment date, you’ll be required to make a balloon payment. This payment will cover the entire remaining balance of your loan.
If you can’t afford to do that then you’ll be forced to refinance your loan or lose your property.
The Right Time to Acquire a Balloon Mortgage
There are three ideal situations that would merit a balloon mortgage for your home.
Low Monthly Payments
Right now, low monthly payments are the only way you can think of in order to afford a home for you and your loved ones. If so, there’s probably no other type of mortgage that could give you lower rates than balloon mortgages. But of course, the final balloon payment is another story.
Selling Your Property
You’re happy with your current home but you also know that in five to seven years, you’ll be moving out for one reason or another and you hope to have sold your home by then. Having such plans will make a balloon mortgage is ideal. With a balloon mortgage, you don’t have to worry at present about high interest rates and high monthly payments. And when its due date comes up, you won’t have to worry either because you can then use the proceeds from selling the property to settle your loan.
Expecting Higher Income
Finally, a balloon mortgage is nothing to worry about if you expect to receive substantial income or earnings in the near future, one that’s hopefully more than adequate to settle your balloon payment.