Mortgage: Is A Balloon Mortgage Right For You?

Mortgage: Is A Balloon Mortgage Right For You

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A balloon mortgage can often times offer very attractively low interest rates on a fixed interest rate for the first several years. Balloon mortgages usually have a fixed interest rate for about 5-7 years! That can save you a lot of money if your interest rate is the lowest you can get! However, you do run the risk of what kind of interest rate you will be able to get after those 5-7 years are over because then you will either need to refinance for the rest that you owe, or you will need to get a new mortgage loan.

A balloon mortgage can be especially good for you if do not plan on living in the house for very long, so you would not have to worry about refinancing, or finding another mortgage for that particular loan because you would be moving anyway, but there is another risk associated with that; not being able to sell your house. If the housing market drops enough without much warning, you would not be able to sell your house when you wanted to without losing a lot of money. If you did not sell, you would either have to refinance the rest of your unpaid balance or you would need to find another mortgage loan. Interest could also be a lot higher by then from when you got your initial loan, which is another thing to consider.

If your income decreased, it could cause you to lose the house if you have to refinance or find a new mortgage loan that is more expensive due to increased interest rates, causing you to no longer be able to afford your home. In that instance, you could be looking at foreclosure if you are unable to make your new payments. However, if you expect your income to increase over the next few years, a balloon mortgage may not be a bad idea because then you can enjoy lower payments for the first 5-7 years, and then once your payments increase (which they will have a high chance of doing since balloon mortgage interest rates are generally lower than what you could otherwise get), you will be able to afford those payments as well with your increased income.

Find out your options for getting a mortgage today!

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