![]() If you have a purchase loan, input the price you paid for the home. Choose “refinance” if you’re getting a mortgage refinance or keeping your current loan. Choose “purchase” if you plan on buying a home and making extra payments immediately. Otherwise, you may want to consider another type of mortgage.How To Use the Additional Payment Calculatorīelow is a detailed summary of how to enter the appropriate loan information for a new or existing mortgage: It could be hard to find a lender that offers the terms and interest rate you're looking for.Ī balloon mortgage could be a good fit if you're comfortable taking on risk. Balloon mortgages are risky for lenders, too, so not all companies offer them. Even if a lender does approve your refinance application, you could get stuck with a high interest rate if you don't have much equity. With a balloon mortgage, you'll gain little equity - if any - because you aren't paying down the principal. When lenders decide whether to approve your refinance application, they look at how much equity you've built in the home. ![]() Refinancing your home with a balloon mortgage could be trickier than refinancing with another type of loan. What if you plan to use your annual bonus to pay off the lump sum, but you actually lose your job? Or you need the money for a financial emergency instead? Selling the home to avoid paying off the principal is also a risky plan, because depending on the market, the home could lose value between the time you buy and the time you sell. There are several risks associated with a balloon mortgage. With low balloon mortgage payments, you don't make much progress on your actual loan, and you could pay hundreds of thousands of dollars all at once in a few years. With a regular mortgage, larger monthly payments help you pay off the total principal over a set number of years. The downside of low monthly payments is that you have to pay a huge sum at the end of your balloon mortgage term. For example, maybe you earn a huge cash bonus from your job at the end of each calendar year and are sure you can put that money toward your mortgage. If you're confident you'll be coming into a large sum of money before your total payment is due, you might like a balloon mortgage. Good choice if you expect to receive more money later.If you expect to sell the home before your lump sum payment is due, you can benefit from a good rate and low monthly payments without facing a huge payment in a few years. But it's always good to speak to your lender before choosing between a fixed and adjustable rate. An adjustable mortgage rate might be a good fit, because rates are gradually dropping and adjustable rates are starting lower than fixed rates right now. Balloon mortgage rates are often lower than rates on other types of mortgages. If the fear of high payments is keeping you from buying a home, a balloon mortgage could help you afford a home sooner. You'll pay less each month than if you got a regular mortgage, especially if your balloon mortgage doesn't require any monthly payments toward the principal. Should you get a balloon mortgage? Balloon mortgage pros This means you could own your home outright in a few years rather than in a few decades, as you would with a regular mortgage. Terms are relatively short, the most common lengths being five and seven years. You can choose either a fixed-rate or adjustable-rate balloon mortgage. ![]() Balloon mortgages don't usually impose prepayment penalties, though, so you can make significant additional payments toward your mortgage to reduce the amount you'll pay at the end, at no extra cost. Many mortgage types charge a prepayment penalty, or a fee for paying off a large chunk of your principal early. You'll also gain a little equity in your home during the balloon mortgage period this way. These monthly payments are still lower than what you'd pay with a traditional mortgage, but the end result is that your lump sum payment won't be quite as large as if you just paid interest.
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