Mark Tiernan, 9 Things You Should Do Before Applying For A Balloon Mortgage

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Mark Tiernan, 9 Things You Should Do Before Applying For A Balloon Mortgage



A balloon mortgage is a short-term mortgage that usually has only about five
to seven years. It works similar to a fixed rate mortgage when you make
monthly payments but at the end of the term, the final payment is much
larger than the other payments to pay off the balance of the loan.

That being the case, there are certain things you need to consider before
applying for a balloon mortgage.

1. What do you need to have in order to apply? Applying for balloon mortgage
is similar to regular mortgage and you'll probably be the same documents and
papers that you would for any other type of mortgage. However, you should
ask your lending institution with paperwork you'll need to have available.

2. what is the interest rate? Just like with any other mortgage to want to
know what the interest rate is. In a balloon mortgage it is usually fixed
for a certain amount of time. Sometimes it may carry a lower interest rate
for the first several years but this really depends on the lender and you
should get this information before you make any commitment.

3. When does the balance become too? In a balloon mortgage you pay part of
the amount borrowed in equal installments, but the last payment can be a
doozy and you are obligated to pay the entire balance. Therefore, no wait
when this is going to crop up is important so that you can either have other
financial arrangements waiting in the wings or start saving your pennies for
that fateful day.

4. Is there a refinance options? Since most people won't have the money to
pay the balloon payment in one lump sum, it's prudent to ask if there are
refinance options with the loan so when it becomes due you can refinance and
come up with a new payment arrangement.

5. Can you lose the refinance option? Sometimes a refinance option comes
with a set of conditions one of which is prompt payment. Find out what kinds
of things can make you lose the refinance option so you can follow the
guidelines in order to keep this option open at the end of the loan.

6. Would you have to qualify to refinance? Refinancing is a privilege
offered to some people with the balloon mortgage and some lending
institutions will want to reassess your ability to pay. Find out if you will
be required to go through some sort of an evaluation and pass and signed
documents began when you refinance.

7. Can you pay the loan? before entering into any kind of loan agreement you
want to look at your lifestyle, expenditures and financial commitments and
figure out if you really can afford to pay not only the payments but the
lump sum at the end.

8. What is the worst case? Before entering into a balloon mortgage agreement
you want to be prepared for anything unexpected and when your worst-case
scenarios. What if you lose your job? You want to think about your own
financial situation as well as the economic situation of the country.

9. What does someone else think? When you're trying to get a mortgage, you
might be too close to the situation to make an impartial judgment. It's not
a bad idea to solicit the advice of a professional finance expert to see if
this is the right thing for you to do.

If you've gone through all the steps and answered all the questions above to
your satisfaction, then you'll know if a balloon mortgage is right for you.

 Lee Dobbins writes for  where you can learn about all aspects of moving
including getting a mortgage.
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