Taking on a mortgage with a 30-year mortgage payment schedule is just like how a balloon mortgage starts, but there is one huge difference. While these payments are very low, after a certain period of time, usually three to seven years, the entire balloon mortgage loan balance is due. This can make for a confusing situation, but with the right information, planning, and using a balloon mortgage calculator can ensure financial stability.
Getting a balloon mortgage starts by going through the standard mortgage application process. However, the difference in obtaining balloon mortgage loans is that they come with an extremely low fixed interest rate, but only for the initial period of the loan. Searching for different lenders, brokers, and companies is an important step to reaching the best possible balloon mortgage deal. Utilizing online reviews to find competitive rates is an excellent start, but consulting with as many mortgage loaners and requesting rates is a surefire way to top notch results. Through this method, comparing results side by side will confirm what lenders actually have the best offer.
Once a lender has been chosen to obtain a balloon mortgage, the next step is confirming the interest rate that has been received is the correct information. If the numbers match, the next step should be finding out when the entire balance will be due, this should range between three and seven years, with the longer period time being the better usually. If the time period being set is well-suited, then it is time to move onto the next step in the process.
Having the option to refinance the mortgage from the current lender is extremely important. This is because it is very farfetched to expect a standard family to finish payments on a new home in several years and refinancing the mortgage will allow for continuation of payments. The process of mortgage refinancing includes taking the current loan and turning it into a fixed-rate mortgage that will pickup from the previous term. For example, an initial term that ended after seven years and refinancing was completed, the fixed-rate mortgage would then be in effect for another 23 years.
Losing the option to refinance a mortgage due to not meeting certain requirements is crucial to keeping the balloon mortgage safe. Ask the lender is there are any guidelines, rules, or requirements to ensure that the balloon mortgage loan will be eligible for refinancing down the line. Another vitally important piece of information that should be asked of the lender is if requalification of a mortgage is required after the initial period. If so, keeping an established and sufficient income is required so that the mortgage can continue.
Once all of these steps have been completed, it is a matter of staying consistent on payments and ensuring that the refinancing of the balloon mortgage is performed correctly. However, obtaining this type of home loan is not for everyone and should be compared with other types and by utilizing balloon mortgage calculators to ensure all payments can be made before and after a refinance.