For many home buyers, a balloon mortgage can be an excellent option. A balloon mortgage is usually rather short, with terms ranging from five to seven years. Despite the shorter term, the actual monthly payment amounts remain affordable because they are based on the terms associated with a 30 year home mortgage.
Consumers may opt to choose a balloon mortgage as they often have lower interest rates than a traditional 30 year fixed mortgage. Despite the benefits associated with a balloon mortgage there are risks to consider. At the end of a loan term, mortgage holders will need to pay off the remaining outstanding balance. This usually means that consumers must refinance, sell the home or convert the balloon mortgage to a traditional mortgage at the current interest rates.
In relation to a Mortgage Marvel mortgage calculator, this is the original or expected balance of a mortgage.
The rate charged in order to borrow a lender's money. The interest rate takes into account the risk and cost to the lender for a loan and depends on the going market rate and how many discount points are paid up-front. When the term is used in conjunction with a Mortgage Marvel mortgage calculator, it specifically applies to the annual interest on the mortgage.
Term in Years
The number of years it will take to repay a home loan. The most common mortgage loan term lengths are 30 years and 15 years. For balloon mortgages, the most common terms are 5 years and 7 years. After that time period concludes, individuals will need to either refinance or pay off the remaining balance. For interest only loans, consumers will have a balloon payment due for the entire principal balance at the end of the loan term.
Monthly Balloon Payment
Monthly principal and interest (P&I) payment in relation to a balloon mortgage. The monthly payments are calculated using a 30 year term.
The total of all monthly payments over the full term of a mortgage. In relation to a Mortgage Marvel mortgage calculator, the total payment amount assumes that there are no prepayments of the principal.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.