Search
Recommended Sites
Related Links






Valid XHTML 1.0 Transitional

Valid CSS!
   

Informative Articles

A Guide to Finding Cheap Loans
Finding cheap loans isn't always easy. it seems like every time you turn around new rates and fees are added and the loan process becomes increasingly frustrating with each new change that's made. Cheap loans don't have to be such a hassle,...

Debt Consolidation Loan and Consolidation Loans
Debt consolidation loan services act as a third party intermediary to assist you in negotiating lower interest fees and monthly payments with your unsecured debt holders. If you are falling behind on your monthly payments, as many consumers are,...

Fast Cash Loans - When You Should Borrow And When You Should Wait
A fast cash loan should be an option used as a last resort to avoid a financial emergency. With its interest rates, a cash loan should not be used to purchase the latest gadget or fashion item. Avoid A Late Payment A late payment can cost you more...

Motorcycle Buyer Tips For Avoiding Upside Down Motorcycle Loans
With the depreciation on motorcycles being so high after they are driven out of the showroom, the potential for a motorcycle buyer owing more on their motorcycle loan than the motorcycle is worth it very high. Owing more on your motorcycle than it...

Unsecured Personal Loans – Satisfying The Need for Extra Cash
Would you like going on a holiday through the sale proceeds or your home? Or, how about repairs in a home that has been effected at the cost of home itself? Ones home is too prized an asset to be frittered away thus. Loans against home, may if...

 
Balloon Or Reset Mortgage Loans - Understanding The Basics

A balloon mortgage, also called a reset mortgage, offers lower interest rates with the option in 5 or 7 years to pay off the balance or resent the loan. Considered more risky than an ARM since interest rates can jump significantly, it is a valid option for those expecting to move or interest rates to drop.

Balloon Mortgage Features

Balloon mortgages are based on a 30 year amortization schedule, but you only pay those payments for 5 or 7 years depending on your loan's terms. At the end of that period, you are required to make a balloon payment for the rest of the principal or resent the mortgage at current interest rates. Some financing companies also offer the option of refinancing the home loan.

With its unique interest rate structure, you can qualify to borrow more than a with a fixed rate mortgage. Balloon mortgages also have interest rates lower than a traditional home loan.

Balloon Mortgage Numbers

Balloon mortgages, like ARMs, use numbers to describe terms. The first number is the number of years until you reset the loan or make the balloon payment. The second number equals the rest of the loan term. Together both numbers equal the loan's amortization schedule.

So a 7/23 mortgage means that you have 7 years until the balloon payment is due, 23 year's worth of principal. Adding the two numbers together, your loan is amortized for 30 years.

Reset Requirements

In order to reset your loan, you have to qualify by still occupying the home, having no liens against the property, and having made on time monthly payments for the last year. If you don't qualify to reset the mortgage, you may be able to still refinance the loan.

Balloon Mortgage Considerations

Balloon mortgages don't have the fluctuating interest rates of an ARM, but they don't have the caps to safeguard against extremely high future rates. You may also find that due to a reverse in your financial situation you many not qualify to reset or refinance your home, and have to sell it to meet the balloon payment. In the end you are trading security of a fixed rate for lower interest payments.

About the author:

See my recommended Home Mortgage Lenders online. Carrie Reeder is the owner of ABC Loan Guide, which offers help finding the best home mortgage loans.

Sign up for PayPal and start accepting credit card payments instantly.