Mortgage Balloons

Has anyone here done a balloon on their primary mortgages?

I seem to think this is uncommon. The question I have is when are the balloon payments typically due? Year X?

Re: Mortgage Balloons

We're not doing a balloon mortgage but I know someone who is. Im not 100% sure but I think the way it works is the first 3 years you pay very low int, ie. 1% int on your mortgage.

For the first 3 years you cant sell or refinance your house. After the 3 years is up you can either sell, re-fi if the rate at the time is good, or you take the balloon rate which is extremely high.

I would think most people would re-fi but remember you have to pay closing costs all over again.

I would check w/ a bank or mortgage broker to be sure, this is what I understood from a friend who is doing a balloon mortgage.

Re: Mortgage Balloons

It's is riskier. 1. You are really relying on your house to definitely go up in value so you can later refinance and cash out the equity. What if it doesn't increase as much as you need it to or what if the market takes a downturn... I know people who bought houses 2 years ago during the craze and they probably would have to sell for slightly less than that now, 2. What will the new rate be? The way the Fed is going with rates is only stable or up, I highly doubt this new Chair of the Rserve will cut. Your mortgage payment can increase by hundreds, or thousands, of dolars a month under the new rate. Most people are fine for the first few years but then they run into problems making the payments later.

Re: Mortgage Balloons

So if I am able to make the balloon payment in year 3... what would I be doing at that point?

Can I fix the interest for 30 years?

Re: Mortgage Balloons

We were offered a 15 year IO balloon mortgage with a 30 year amortization

So at the end of 15 years we would sell or refinance.

We didnt do it but definitely considered it b/c we only plan on being in the house 10 yrs max.

It depends on your situation, but they do 10, 15, 20 yr balloons.

ETA: Yes, fixed rate is available

Message edited 6/15/2006 12:37:33 PM.

Re: Mortgage Balloons

What does IO stand for?

Do Balloon mortgages have a lower interest rate than traditional mortgages?

Re: Mortgage Balloons