Refinance Mortgage Balloon Coming Due
What Are Balloon Mortgages?
Balloon mortgages are essentially short-term loans. When you acquire a balloon mortgage, your monthly payment and interest rates are based on thirty-year loan amortization schedules. That sounds good, doesnít it? But keep in mind that these are short-term loans; they usually cover five to seven years and on the final payment date, youíll be required to make a balloon payment. This payment will cover the entire remaining balance of your loan.
If you canít afford to do that then youíll be forced to refinance your loan or lose your property.
The Right Time to Acquire a Balloon Mortgage
There are three ideal situations that would merit a balloon mortgage for your home.
Low Monthly Payments
Right now, low monthly payments are the only way you can think of in order to afford a home for you and your loved ones. If so, thereís probably no other type of mortgage that could give you lower rates than balloon mortgages. But of course, the final balloon payment is another story.
Selling Your Property
Youíre happy with your current home but you also know that in five to seven years, youíll be moving out for one reason or another and you hope to have sold your home by then. Having such plans will make a balloon mortgage is ideal. With a balloon mortgage, you donít have to worry at present about high interest rates and high monthly payments. And when its due date comes up, you wonít have to worry either because you can then use the proceeds from selling the property to settle your loan.
Expecting Higher Income
Finally, a balloon mortgage is nothing to worry about if you expect to receive substantial income or earnings in the near future, one thatís hopefully more than adequate to settle your balloon payment.
Factors to Consider When You Refinance Your Balloon Mortgage
Now, planning is all well and good but there are times when nothing, no matter what you do, will go your way. Youíve done all you could but in the end, you realize that you canít afford to pay off your final balloon payment. When that happens, you have only two options: refinancing or losing your property. If you choose the former, here are several important factors to consider.
Definitely, you should choose a refinance loan that offers you better rates compared to your existing loans. To qualify for such loans, however, youíll need to prove to lenders that youíre a good credit risk.
What kind of mortgage would you like to take out this time? Donít repeat past mistakes. If a balloon mortgage didnít work the first time around, it might not work the next time either. Take out the kind of loan youíre most comfortable with. Youíve got a lot of options to choose from so take your time weighing the pros and cons of each alternative.
Refinancing would occasionally come with hidden fees or charges so make sure youíre aware of exactly what youíll have to pay when you refinance your balloon mortgage.
Last but not the least, get a refinance loan only from trusted providers!
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