Balloon Loans – How One Could Help You
Today, there is a specific loan type for just about anything that you could need money for – whether short or long term. A balloon loan also has a specific purpose, and it could be what you are looking for if you are looking for something that is more of a short term than long term. Here are some ways that a balloon loan could help you.
A balloon loan, whether as a first or a second mortgage, is always set up for a 30-year span. This is so that there is a basis with which to calculate the payments. Your payments will always be what they should be to become fully amortized over the 30-year period. Balloon loans then are given a period of time, such as 5-year, or seven-year, or even a 15-year, in which they become due.
Balloon mortgages are usually fixed rate mortgages. The interest rate on a balloon mortgage is also a little lower, too, which reduces your monthly payments even lower, bringing even larger savings. There generally are not any limits on interest placed on refinancing, such as there might be with a 30-year ARM, so you will be refinanced at whatever is the current rate. Refinancing is simpler, though, and, if it is in your contract, you will not need to be requalified, or the property reassessed, and fees will usually be minimal.
When a balloon mortgage becomes due, then full payment is expected. However, because there is so much left to be paid, most people are required to refinance in order to pay the balloon mortgage off. Whatever the interest rate is at the time, is the rate that you will have to take – there is not much of an option here.
If you are looking to buy a house, and stay for a short term, either less than the typical 5, 7 or 15 years, then you have a real good way to save some money. A balloon loan allows you to enjoy the lower monthly payment rates, and you can sell it before the balloon payment becomes due. This gives you the perfect opportunity to buy an even a larger house for less. The only problem is if you decide you want to stay – then you must refinance.
Balloon mortgages are more commonly being used as a second mortgage now, in order to reduce monthly payments and save hundreds of dollars each year. If you do not have a 20% Downpayment when you apply for your mortgage, then you will be required to get private mortgage insurance (PMI). You can avoid this by getting a piggyback loan, one for 80% (first mortgage) and the other for 20% (balloon loan), and then you will not need to get the costly and unnecessary PMI.
It is even possible to get a larger balloon loan if you get it against the equity built up in your house. Another option would be for the purpose of projects around the house in the way of construction and remodeling – especially if you want to do it before you sell. When applying for a balloon loan you want to be sure to check out the various fees and compare several potential mortgages in order to see which one has the best deal for you. Also make sure that you get one without any penalties for paying it off early.
Joseph Kenny
http://www.articlesbase.com/finance-articles/balloon-loans-how-one-could-help-you-110086.html
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2010/02/18 at 17:47:59
you bring up an EXCELLENT point.
yeah, why the heck should everyone else reward financil stupidity.
1. you have the crooked mortgage lenders who tlaked them into these stupid loans.
2. you have the naive people that believed that they could make a profit when the price was going up 22% in a year.
References :
2010/02/18 at 17:45:59
I agree with everything you said. They are greedy people. The government should not help these people. It makes me mad and it is not fair.
References :
2010/02/18 at 17:43:59
I agree with you 100%. I was wondering myself about the mind set of these people whom we are bailing out with our own tax dollars. We, like you, saved and scraped for larger down payment (30%) so that the monthly payment would be lower. We bought the house (like you) which we could afford. We didn’t want to have to worry about money every month so even if we could afford a better house, we settled on the one even if one of us became unemployed.
These people must be greedy with no sense of personal responsibility. These are the people who sued a big corporation for dropping a hot coffee on the lap claiming the coffee’s temparature was unreasonably too hot. It wasn’t the company who dropped the coffee on the person’s lap. These are the people who sued tobacco companies for their breathing problems and got a lot of money when nobody asked them to smoke but their own will to smoke while there were many other people who quit when they found out tobacco was harmful.
America is full of these people, ignorant, uneducated, greedy, and people who take no personal responsibility of their own actions. They blame school and teachers for their kids’ bad behavior when they could not even property teach and guide their own kids.
I don’t have any solutions to fix these people or their behaviors. But I am glad there is somebody who thinks like me. Thanks for reading.
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2010/02/18 at 12:41:11
why did so many people sign mortgages that they knew were going to balloon and they wouldnt be able to afford ?
i dont understand why so many people bought houses that were far far more then they could afford,and agreed to interest only/adj rate/ balloon payments / split loans ect…….that many people cant just be idiotic, what goes through the mind of someone when they are buying a 250,000 dollar house and there total monthly income wouldnt even cover the damnd payment anymore once the interest kicks in and all that. were you guys mislead? high maybe?
also , why is it ok for those people to have help to keep there homes at the expense of tax payers dollars? i bought a house i could afford and its not the greatest house in the world but i can afford to keep it, why should i now help them/YOU to keep you super nice house that you shouldnt have bought in the first place.
please ,someone explain this , it is insane to me.