Loan Programs

Balloon Mortgages

Balloon mortgages are home loans that typically last for shorter periods of time, most are between 3 and 10 years, and these types of loans allow the borrower to pay lower monthly payments and interest rates.

A “Balloon mortgage” is a non-amortizing loan. Unlike many other mortgage loans, a balloon mortgage loan does not pay itself off at the end of the loan term. At the end of the loan’s term, a portion of the principal remains and comes due in a single payment. In this type of mortgage loan, the home owner is assessed a series of equal monthly payments. After these payments have been made, the borrower will have to make a large final payment, which is called the balloon. When certain criteria are met lenders may convert the home loan to a fixed or adjustable rate mortgage.

Balloon mortgages are also usually fixed-rate mortgages, but the monthly payments you make will most likely only include interest. The balance will be due after a short period of time, such as three to five years. At the proposed maturity date, the principal of the mortgage loan becomes due. Under the terms of the deal, the borrower will have to make that final payment. If the borrower is unable to do this, they may solve this situation by taking a second mortgage, refinancing, or simply selling the house at its current market value.