When thinking about which type of mortgage loan to get, do not dismiss the possibility of a balloon mortgage! A balloon mortgage is especially great if you need smaller payments for your loan initially, but after a few years, expect your income to increase to cover higher payments. A balloon mortgage can also be very beneficial if you do not plan on living in the house for very long.
Basically, a balloon mortgage loan is a loan that can provide a lower interest rate than what you could probably normally get for the first 5-7 years, fixed, so your payments stay the same. After that time period, the balloon mortgage term expires and you either need to refinance the remaining balance that you owe, get a new loan, or move. By doing this, you risk the interest rate being higher and having to pay on an expensive mortgage. You cannot even guarantee that you will be able to move since the housing market could drop, leaving you unable to sell due to losing too much money.
However, things could also be for the better as well with a balloon mortgage loan. You could save a ton of money on interest through the balloon mortgage loan, and then interest prices could drop once your balloon mortgage term expired, allowing your payments to be not that much higher, if higher at all. It could also allow you to get into the house you really want with the first 5-7 years allowing you much lower payments, then your income could increase to allow you to afford the second loan. It is important to weigh all the pros and cons and then consider your situation, and where you will most likely be 5-7 years from now to determine if a balloon mortgage is right for you.
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