How does a balloon mortgage work?

already exists.

Would you like to merge this question into it?

already exists as an alternate of this question.

Would you like to make it the primary and merge this question into it?

exists and is an alternate of .

A balloon mortgage is a short-term, fixed rate home loan with fixed monthly payments for a set number of years (usually 5-10) followed by a final payment of the principal.
Payments are usually lower with a balloon mortgage because only the interest is paid each month. For example, borrowing $10,000 in a balloon mortgage means that a large payment is due in one lump sum at the end of the term.
Note that if you cannot make the final payment or refinance the amount, you can lose your home.  
The reason for the "balloon" payment is due to a difference between the repayment term (time until maturity) of loan and the actual payment amortization (repayment plan).
With regular financing, 30-year mortgages will have a 30-year amortization (repayment plan) and a 15-year mortgage will have a 15-year amortization. With ballooon finanicng, the loan is frequently due (term) in 15 years, but the payment amortization is for a 30-year repayment. Consequently, at the maturity of the loan in 15-years the debt will not have been repaid, resulting in the last payment being significantly higher.
The benefit for this type of financing is that the borrowers have a low monthly payment. The downside is that the loan usually must be refinanced before the last payment is due (as most people do not have enough to cover such a high lump sum).  
This type of financing has put a lot of people in the situation that they have bought more home than they can afford and believe they are paying it off by making a low monthly payment. Meanwhile, when they cannot prove enough equity or if their future situation does not allow them to refinance, they end up as one of the very many who are being foreclosed upon.
269 people found this useful

What is a reverse mortgage and how does a reverse mortgage work?

Designed for seniors, a reverse mortgage is a loan that allows the homeowner to convert some of the equity in their home into cash or monthly income, while retaining home ownership. A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM) is a relatively new product. A reverse mort (MORE)

Can you use a balloon mortgage to repeatedly refinance the same house?

Yes you can just keep on refinancing until you have reached the maximum of your home's fair market value. The fees will add up to a huge amount and you will never get out of debt. There will come a time when you default on your payments and the bank will take your home by foreclosure.

What is an interest only mortgage and how does it work?

\n. \n Answer \n. \nAn interest only mortgage is exactly what it sounds like. It's a mortgage like any other except your monthly payment is an interest only payment, meaning that all the money you send in every month all goes towards the interest on the loan. You are not paying down the princi (MORE)

How does mortgage work?

Mortgage works the same as paying layaway. You put a percentage of the money down upfront, and pay a percentage of the remainder off each month to the bank plus accumulating interest.

How does a hot air balloon work?

Hot air balloons get their buoyancy from hot air created by apropane burner at the base of the balloon. Hot air is less densethan cold air and so weighs less. When the cold air that isdisplaced weighs more than the balloon, the balloon will rise. Theballoons weight is controlled by turning the burne (MORE)

What is reverse mortgage and how does it work?

A reverse mortgage, also known as a Home Equity Conversion Mortgage(HECM) is a relatively new product. A reverse mortgage providesunique benefits for its target market: someone over 62 who lives inhis/her primary residence, who has substantial equity in his/herhome, and who has little or no income. (MORE)

Are balloon mortgage payments legal in Missouri?

Yes, they are legal in any state unless the borrower(s) can prove they were deliberately mislead concerning the terms and conditions of the contract or other fraudulent action on the part of the lender can be proved.

How does cosigning on a mortgage work?

You assume responsibility for a loan for a house. It is not a recommended thing to do, because non payment can affect your credit rating. Also, the amount of the loan affects your debt to income ratio, so you may have a problem borrowing on your own behalf.

How hot air balloon works?

A controled fire heats the air inside the balloon. Since hot air rises, and the air around the balloon is cooler than the air in the balloon, it generates lift.

How does a reverse mortgage purchase work?

Similar to a purchase with a regular mortgage. The difference is that you need a large enough down payment to qualify, and you won't ever have to make a mortgage payment on the new home.

What is the working principle of a weather balloon?

Simply put, the weather balloon is a lighter-than-air vehicle or aerosonde that provides lift to an instrument package to get it to altitude. The instruments thus situated can collect data which, when combined with other information from both similar and different sources, can be used to assess curr (MORE)

How does a balloon powered car work?

1. Put your car on a flat and smooth surface . 2. Blow up the balloon and twist it so air doesn't come out . 3. Attach, tape, or glue, however your car is made, to your car . 4. When it's ready let the balloon go and watch it go . Sorry if it didn't help, I'm making a one now and can't get it to (MORE)

How do helium balloons work?

helium balloons get filled with a amount of air in which is called helium it is used to make balloons float around in air. helium is a inert,gaseous element!!!!! yea i kenisha am smart Helium is less dense than air, therefore a helium-filled balloon will float in air. Helium is lighter that air, (MORE)

Are balloon mortgages and straight term mortgages similar?

Not really...the balloon Note is due in a "lump sum" at a required time period. But it can have monthly payments and then "Balloon".... but a straight term loan usually is a fully amortizing loan with princiapl and interest payments made each month until the loan is paid in full.

Explain how a hot air balloon works?

the hot air in the balloon rises thus causing the basket to lift of the ground. the heat is created by a flame under the balloon. Chinese lanterns work in the same way

How does balloon flight work?

By using a heat burner, hte balloon pilot makes the air in theballoon lighter than normal air. Then the balloon moves upward andmoves with the wind.

How does interest in a mortgage work?

the interest on a mortgage works as follows. it either accumulates every X amounts of months (depends on your mortgage). for the example its monthly. If your annual mortage is 7 percent. Every month the add on (7/12) of a percent of what you owe back onto what you owe. Say you owe 100,000$ that wo (MORE)

Can we refinance a balloon mortgage to a fixed mortgage?

Yes, usually through the lender that originally financed you. They want their money, right? So, if you cannot make the balloon payment when due, it is in their best interest to refinance you into an affordable fixed rate loan. This way, you can make monthly payments, and they get their money = every (MORE)

How do balloons work?

Let's say that y­ou take a plastic 1-liter soda bottle, empty out the soft drink it contains, put the cap back on it (so you have a sealed bottle full of air), tie a string around it like you would a balloon, and dive down to the bottom of the deep end of a swimming pool with it. Since the bottle (MORE)

How does a reverse mortgage work when you die?

The lender gets the property when you die. If your heirs want tokeep the property then they must pay off the reverse mortgagewithin a certain time period after your death. However, the costsare often very high. The lender should be notified of the death ofthe owner. If the heirs cannot pay the lende (MORE)

How do government balloons work?

Government balloons are just like normal balloons except for the fact that they are used for government purposes. The government will use hot air balloons to transport military supplies, carry weapons, and to travel.

What is a reverse mortgage and how does it work?

In short, a reverse mortgage is a mortgage that does not require any mortgage payments to be made, and the funds received from the loan can be received via a lump sum of money, an equity line of credit, or monthly payments made to you from the lender. Most of these mortgages are backed by FHA's HECM (MORE)

What makes a hot air balloon works?

a hot air balloon works when the hot air blowing from the bottom pushes up the balloon which lifts it up into the sky where it moves in the direction where the wind blows .

Can a balloon work as a condom?

yes but it has to be a bigger balloon and quite dangerous and painful there is a risk of the balloon can catch on the genitalia and cut off circulation also balloons would bring pain to both unless lubricated

How do buy to let mortgages work?

A buy to let mortgage is a mortgage loan that an investor uses to purchase a rental property for producing residual income. The loan amount and the interest rates are different than a conventional mortgage.

What is a piti mortgage calculator and how does it work?

The piti mortgage calculator is an online calculator that will calculate your principal, your down payment, your interest, your insurance for your house so that it makes it much easier for you to understand just what all the charges are and the cost of everything up front.

How a mortgage works?

It's a loan in which the house functions as the collateral. If you don't pay your mortgage (fixed amount agreed upon) then you lose your house (the collateral).

How do self certified mortgages work?

Self-certified mortgages are for those that cannot provide proof of income. For example, self-employed persons need to sign a self certified mortgage. It is similar to other mortgages in that you need to fill out all the paperwork, however, you need to sign an extra form stating that you certify tha (MORE)

How are hot air balloons work?

people put helium in the balloon because heileum burns easily so thats what the fire is for and thats how the balloons fly! Jacob rocks

How does VMware memory ballooning work?

Transparent Page Sharing is one of the methods to avoid redundant page/memory allocation . Balloon driver will not be present if vmware tools are not installed . If reservation is not specified , the non-reserved memory is always swappable to disk . So whenever there is memory pressure on the host (MORE)

How does locking a mortgage rates work?

When you "lock in" a mortgage rate you are accepting the offer presented to you by the bank, mortgage lender, mortgage broker, or credit union you are working with. The lender is essentially reserving a spot for you and the money necessary to fund your loan at the agreed upon rate, assuming your mor (MORE)

How do loans for mortgages work?

A loan for a mortgage starts out with an application that includes a credit check which will help determine the interest for the loan. Once approved, the house becomes the collateral and all money loaned as well as interest must be paid.

How does a reverse mortgage calculator work?

A reverse mortgage is a program for seniors backed by the Federal Housing Administration that enables them to access the equity of their home without repayment. The mortgage calculator works by comparing loans. This program provides seniors with added security by acting as financial supplement for s (MORE)

How does a mortgage refinance calculator work?

A mortgage refinance calculator takes a collection of user-inputted data such as mortgage value, yearly dues, interest rate, and more. From this, the calculator determines how soon the mortgage will be paid off.

How does a let to buy mortgage work?

In regards to a let to buy mortgage, as long as it is earning income, a let to buy mortgage is bought on any property. Buy to let mortgages allow individuals to borrow money to rent out or buy properties with. They are known to make good investments despite the decline in usage.

How does no cost mortgage refinance work?

No-cost mortgage refinance refers to a situation where a borrower pays no closing costs on a mortgage that is refinanced. Typically, this is done because the new lender will pay the original lender the closing costs, and will still make a profit at the lower mortgage rate.

What does 'balloon mortgage' mean?

The term 'balloon mortgage' refers to a type of loan where one pays off the majority of the capital at the end of the term. You pay the interest in the meantime.

How do seller financed mortgages work?

The home owner actually "finances" or accepts payments fom a private individual, in a seller financed mortgage deal. Many homeowners are reluctant to do this for many valid reasons.