What is a balloon note mortgage?

Answer 1

I believe there are a few different types of Balloon Notes.They usually are at lower interest rates also I am familiar with the kind that basically can "call in " your mortgage for full payment at any time. I think another type is when you refinance and are only given a certain time span other than the usual 15, 20, 25 or 30 yr. kind. They will give you say 5 years and then you pay the balance at the end in full. Check with your banks and see what they have. I've known people get themselves in deep trouble financially with these. I think they may have been banned in some states and the average consumer folk are no longer offered these loans.

Answer 2

Normally, a mortgage is amortized over 15, 25 or 30 years. It means the amount you borrowed together with all the interest is spread over those years into equal monthly payments. A balloon mortgage is a little different. See the following example:

Let suppose you have a $100,000 mortgage at 7% interest amortize rate of 30 years, 10 year balloon. What it means is that your monthly payment will be the same as a 30 year mortgage. Each month your payment will include so much for interest and so much in principal. By the end of the 10th year, just like your regular 30 year mortgage, you still have a large loan balance. However, unlike the regular 30 year mortgage, your entire unpaid balance of the loan is due.

This kind of mortgage is most often used in commercial properties. Commercial properties turns over between 5 to 10 years. So the owners sleldom need a 20 or 30 year loans. However, 25 to 30 year amortization rate mortgages have lower payments which help provide more cash flow to the owner. Therefore, the 30 year amortization loan with a 10 year balloon is desirable. That is not the case with residential mortgages.

Answer 3

No matter what the bankers / mortgage companies say .
It is a great Win deal for them. For you - you may enjoy sleeping in the car.
Balloon mortgages are a dumb idea for you , you will lose.
You have very small payments for the time before the balloon is due. When it is due you have to find a mortgage at higher rates than now and really for nearly the same amount of principal as when you bought it. You better have all your debts paid off and reall money to close. A Balloon is really just renting and the banks win.
If you can not qualify for a FIXed rate 80% mortgage on 30 years or less. The principle and interest equals one week of your take home pay. No 20% Adjustable Rate mortgage to avoid Property Mortgage Insurance.
If you cann't do this - don't get it.
I will not come visiting in 2-3 years to serve you a foreclosure note cause you payments exceed you livable income.
Understand you are playing with pretty snakes.
Go with knowledge. visit DaveRamsey.com to learn before you get Burned.

Answer 4

So harsh on the balloon because you dont realize how unrealistic it is for it to hit you in most cases. In the residential side your looking at a 40 yr or 50yr loan that balloons in 30 years. Anyone who is getting this type of loan, and most others, refinance or move in 5 years. The amount of people hitting this balloon has to be extremely low. In commercial the loans balloon in 5 or 10, you dont have much of a choice.

Answer 5

It means you will have a huge payment to make at the end of your loan. For instance the lender will give you a smaller payment for a few years then at the end you will have to pay the balance which can be 50k up to 200K depending on how much you are borrowing.
Most people dont worry about it because most people refinance before the balloon payment is due.

Answer 6

generally it is the very last payment of a short term mortgage, like a 2nd or 3rd trust deed loan and generally is quite higher than the monthly mortgage pymnts that have been made.

be cautious and research all your options before you sign ANYTHING!! you can end up losing your house if you cannot make that balloon payment.