balloon rate mortgage definition

Balloon mortgages were once the leading type of mortgage in the U.S, but they are relatively rare today. This is due, in part, to the government’s support for the 30-year, fixed rate loan.

Finance: What is Balloon Interest, or a Balloon Payment? Balloon loans often appear in the mortgage market, and they have the advantage of lower initial payments. Balloon loans can be preferable for companies or people that have near-term cash flow issues but expect higher cash flows later, as the balloon payment nears. The borrower must, however, be prepared to make that balloon payment at the end.

Sure, a balloon mortgage could be a great deal if interest rates stay low, home values continue to appreciate, and your income and credit don’t drop, but those are pretty big "ifs" to gamble.

Balloon Mortgage: A balloon mortgage is a financing mechanism where the payments are not fully amortized over the term of the loan. Sometimes the borrower needs to pay only the interest on the loan. As the loan is not fully amortized, the borrower needs to pay a large sum of money at maturity, in some cases the full principal, in order to.

Definition of Balloon Mortgage A balloon mortgage is a mortgage loan that usually requires monthly payments over a relatively short period of time (usually a number of months or a few years) after which the remaining mortgage balance is due in one large lump-sum or "balloon" payment.

The appeal of the Adjustable Rate Mortgage, or ARM, is that it offers borrowers an. one-time payment at the end of the loan term, known as a “balloon payment.”.

For instance, some balloon mortgages convert to a 30-year fixed-rate mortgage at the end of their original term. You might choose a balloon mortgage if you anticipate being able to refinance at a favorable rate at the end of the term or if you’re confident you’ll have enough money to pay off the loan in a lump sum.

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Balloon mortgages have an early repayment option. Borrowers can also establish their loan similar to a traditional fixed-rate mortgage with the embedded option. A balloon payment mortgage may have a floating or a fixed interest rate. Conventional fixed-rate mortgages typically have a higher total debt repayment than that of balloon mortgage loans.

Mortgage Payment Definition balloon rate mortgage definition balloon Mortgage Definition – Find Rates & Mortgage. – balloon mortgage 1. This type of loan requires the borrower to make regular monthly payments which amortize over a specified term, but at the end of that term a final payment or large lump sum (balloon payment) must be made to pay off the remaining principal.To compile these results, HSH.com calculates the annual before-tax income required to cover the mortgage’s principal, interest, property tax and homeowner’s insurance payment.