Balloon Loans

A low payment option for frequent movers.

Definition:
Balloon mortgage loans are short-term fixed-rate loans with fixed monthly payments for a set number of years followed by one large final balloon payment ("the balloon") for all of the remainder of the principal. Typically, the balloon payment may be due at the end of 5, 7, or 10 years. Borrowers with balloon loans may have the right to refinance the loan when the balloon payment is due, but the right to refinance is not guaranteed.

These products are sometimes referred to as two-step programs.  Amortization period is customarily 30 years. 

Advantages:

• Lower payment than the thirty year fixed
• If you are going to relocate in 5, 7 or 10 years

Disadvantages:

• Remainder of balance due at the end of term
• Refinance not guaranteed