OTHER:
Balloon
Mortgage
The Bottomline seven-year balloon mortgage is a type of fixed-rate mortgage with
a term of seven years. The principal and interest you pay are amortized over a
longer period (30 years) than the actual term of the mortgage. At the end of the
balloon period, you may pay off the outstanding balance with a lump-sum payment
or exercise the option to refinance for the remaining term. The option to refinance
is conditional, meaning you have to meet certain conditions (such as a history
of timely payments or no second liens on your property).
Advantages:
Ideal if you plan to sell or refinance your home within seven years and want a low monthly payment during that time. The interest rate you pay on a balloon mortgage is usually lower than a comparable 30-year fixed-rate mortgage.
With a refinance option at the end of seven years, you have a "safety net" in case a planned relocation doesn't take place or economic conditions prevent you from moving to a larger home. (You may want to understand all the conditions needed for a refinance before getting this loan.)
You need not re-qualify for this loan when refinancing at the end of seven years as long as the new interest rate is not more than 5 percent above the current interest rate.