For example if you have a $100,000 5 year balloon mortgage with an interest rate of 6.25%, your monthly payment would be around $616. But at the end of 5 years you would still owe $93,337.
A balloon mortgage is an excellent option for many home buyers. They have lower interest rates, and are easier to qualify for than a traditional 30 year fixed mortgage. At the end of your loan term you pay off your outstanding balance. This usually means that refinancing is necessary. It is possible to sell the home or convert the balloon mortgage to a traditional mortgage at the current interest rates. Many lenders have other options such as a conversion feature at the end of the term.
If you have bad credit, first time home buyer, or something else that would make you a slight credit risk – a balloon mortgage might be the right option for you.
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