Balloon Mortgages

A balloon mortgage can be an excellent option for many home buyers. A balloon mortgage is usually rather short, with a term of five to seven years, but the payment is based on a term of 30 years. They often have a lower interest rate, and can be easier to qualify for than a traditional 30 year fixed mortgage. There is, however, a risk to consider. At the end of your loan term you will need to pay off your outstanding balance. This usually means you must refinance, sell your home or convert the balloon mortgage to a traditional mortgage at the current interest rates.

Balloon Mortgages Balloon Mortgage Results

Your payment is MONTHLY_PI for TERM_BALLOON years with a rate of INTEREST_RATE. **GRAPH**

Your payment of MONTHLY_PI is fixed for the TERM_BALLOON year term of your balloon mortgage. After REGULAR_PAYMENTS regular monthly payments you will have a balloon payment of BALLOON_PAYMENT that will need to be paid off or refinanced. (Your ending balance of BALLOON_PAYMENT does not include any prepayments.)

Mortgage Summary PaymentsREGULAR_PAYMENTS monthly payments of MONTHLY_PI

1 balloon payment of BALLOON_PAYMENT Loan amount LOAN_AMOUNT Interest rateINTEREST_RATE Term TERM_BALLOON years Amortization period TERM years Total of regular payments TOTAL_OF_PAYMENTS Balloon payment BALLOON_PAYMENT Total interest paid INTEREST_PAID Prepayment Results

Principal prepayments on your mortgage can save you a great deal of interest. Below is a summary of your proposed prepayments for your balloon mortgage.

Prepayment Summary AmountPREPAY_AMOUNT PREPAY_TYPE Start with paymentPREPAY_STARTS_WITH&NBSP; Total paymentsPREPAY_TOTAL_OF_PAYMENTS&NBSP; Total interestPREPAY_INTEREST_PAID&NBSP; Interest savingsPREPAY_INTEREST_SAVINGS&NBSP; Balloon paymentPREPAY_BALLOON_PAYMENT&NBSP; Payment schedule

**REPEATING GROUP**

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

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// Definitions Mortgage amountOriginal or expected balance for your mortgage. Interest rateAnnual interest rate for this mortgage. Term in yearsThe number of years over which you will repay this loan. The most common balloon mortgage terms are 5 years and 7 years. After the mortgage term is complete, you will then need to refinance or pay off the remaining balance. Monthly paymentMonthly principal and interest payment (PI). The monthly payment is calculated using a 30 year term. Total paymentsTotal of all monthly payments over the term of the balloon mortgage. This total payment amount assumes that there are no prepayments of principal. Total interestTotal of all interest paid over the term of the balloon mortgage. This total interest amount assumes that there are no prepayments of principal. Prepayment typeThe frequency of prepayment. The options are none, monthly, yearly and one-time payment. Prepayment amountAmount that will be prepaid on your mortgage. This amount will be applied to the mortgage principal balance, based on the prepayment type. Start with paymentThis is the payment number that your prepayments will begin with. For a one-time payment, this is the payment number that the single prepayment will be included in. All prepayments of principal are assumed to be received by your lender in time to be included in the following month's interest calculation. SavingsTotal amount of interest you will save by prepaying your mortgage.

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