Is a Balloon Payment Mortgage right for you?
Wondering what is California Balloon Payment Mortgage? A balloon payment mortgage is a mortgage which does not fully amortize over the term of the note, thus leaving a balance due at maturity.
The final payment is called a balloon payment because of its large size. Balloon payment mortgages California is more common in commercial real estate than in residential real estate. A balloon payment mortgage may have a fixed or a floating interest rate. The most common way of describing a balloon loan uses the terminology X due in Y, where X is the number of years over which the loan is amortized, and Y is the year in which the principal balance is due.
What is a Balloon Payment Mortgage?
Examples of a balloon payment mortgage is the 5, 7, or 10-year Fannie Mae Balloon, which features monthly payments based on a 30-year amortization. In California balloon payment mortgage, the amount of the balloon payment must be stated in the contract if Truth-in-Lending provisions apply to the loan.
The best Balloon Payment Mortgage option
Because borrowers may not have the resources to make the balloon payment at the end of the loan term, a “two-step” mortgage plan may be used with balloon payment mortgages. Under the two-step plan, sometimes referred to as “reset option”, the mortgage note “resets” using current market rates and using a fully amortizing payment schedule. This option is not necessarily automatic, and may only be available if the borrower is still the owner/occupant, has no 30-day late payments in the preceding 12 months, and has no other liens against the property. For balloon payment mortgages without a reset option or where the reset option is not available, the expectation is that either the borrower will have sold the property or refinanced the loan by the end of the loan term. This may mean that there is a refinancing risk.
Adjustable rate mortgages are sometimes confused with balloon payment mortgages. The distinction is that a balloon payment may require refinancing or repayment at the end of the period; some adjustable rate mortgages do not need to be refinanced, and the interest rate is automatically adjusted at the end of the applicable period. Some countries do not allow balloon payment mortgages for residential housing: the lender must continue the loan (the reset option is required). To the borrower, therefore, there is no risk that the lender will refuse to refinance or continue the loan.
Would you like to know more about balloon payment mortgage California? We are at a call away to help you enrich your knowledge about California Balloon mortgage. Our mortgage professionals will help to understand how you can benefit from balloon payment mortgage California.
Call us today at 424 225 2167! One of our mortgage professionals will help you get the best possible loan solution for your situation. We’ll be with you every step of the process and not hand you off to someone else.
If you’re interested in a Balloon Home Loans – Let’s be sure we have discussed all the terms…
In this modern economy, lenders provide loans tailored to just about any situation. Balloon loans are one such loan, but carry a serious downside if you’re not careful.
What is a Balloon Payment Mortgage?
A balloon loan has nothing to do with hot air or floating around the world in 80 days. Fail to plan very carefully when using one of these loans however, and your financial world will definitely go down in flame like the Hindenburg.
A balloon loan is a mortgage with a fixed interest rate for a set period of years. Unlike traditional fixed rate home loans, the interest rates on balloon loans are nearly as low as those found on adjustable rate mortgages. The problem with balloon loans, however, is the term.
While balloon loans provide a low fixed interest rate for a set period of years, those years are not in abundance. Instead of a fifteen or thirty year repayment term, a balloon loan typically has a term of seven to ten years, depending upon what the lender was willing to give you. At the end of the term, you must repay the balloon loan in full. Yes, in full. Let’s take a look at how this can play out.
In 2005, you find a home you love but can’t qualify for a loan. You are so engrossed with the property that you eventually locate a lender willing to write you a balloon loan. The loan is for $400,000 and has a 7 year term. At the end of the seven years, you’ve paid the loan down by $50,000, but still owe $350,000. Somehow and some way, you must come up with that $350,000 to pay off the loan. If you don’t, the lender will foreclose on the home.
Every borrower that goes with a balloon loan fully intends to refinance the property before the balloon blows. While this makes sense, you have to keep in mind that refinancing is no sure thing. Maybe you can, but maybe you can’t. Also, we are experiencing some of the lowest loan rates every seen. Chances are very strong that in seven years, rates are going to be much higher. Are you really going to be able to afford those rates?
Balloon home loans are all about seeing the future. In essence, you are pulling out the tea leaves and betting on rates in the future. If you get it wrong, your financial life can become a nightmare.
Call us today at 424 225 2167! One of our mortgage professionals will help you get the best balloon payment mortgage loan solution for your situation. We’ll be with you every step of the process and not hand you off to someone else.