A balloon mortgage is a mortgage that doesn’t fully amortize over the term of the loan but instead at the end of the loan term. A large portion of the principal balance is repaid with a single payment. The borrower must decide to either pay the loan balance in full, refinance, or sell the home. A balloon mortgage has certain advantages; it typically has lower interest rates, lower monthly payments, and is easier to qualify for with a 15- or 30-year term.
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Most borrowers that use a balloon mortgage intend to sell the home before the balloon payment is due. If the buyer decides to refinance the mortgage at the end of the term, one disadvantage of a balloon mortgage is that interest rates at the time could be higher, and your monthly payment could increase significantly.
If the borrower is unable to refinance, they still need to pay off the loan and could be forced to sell the home or face foreclosure. Like anything, there are pros and cons to using a balloon mortgage, so know the details and make a decision based on your personal financial situation.
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One of the reasons to call the Agardi Team if you want to buy a home or have one to sell is:
Not only do we sell our clients’ homes for more money and faster than the average area agent, but your home is also more likely to sell. According to 2015 MLS statistics, only 71% of area homes sold during their listing term. Compare that to our 95% of homes listed that sold before the end of the listing term. YOUR HOME SOLD GUARANTEED OR WE’LL BUY IT*
To discuss the sale of your home, call The Agardi Team at 718-755-2882 and start packing!
*Agardi Team and the seller have to agree on the price and the closing date.
