Balloon mortgages an balloon loans

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Balloon mortgage loans are short term mortgages that have some features of a fixed rate mortgage. In general, Balloon Mortgages have fixed rates and terms of 5 or 7 years. However, when the term expires, a final, large balloon payment is due to pay off the loan balance. At that point borrowers will either refinance or sell the home before this balloon becomes due.Some Balloon Mortgages include a conditional right to convert the Balloon Mortgage into a fixed rate mortgage for the remaining term. This is called a conversion option. The lender charges a nominal fee to convert the loan when the Balloon payment is due.

Why choose a Balloon Mortgage?
With a Balloon Mortgage, the rates are generally lower than on a 30-year fixed mortgage. This allows a borrower to qualify for a larger home because of the lower interest rate - and therefore the lower monthly mortgage payment - is lower.

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