Balloon Mechanics

Although the monthly payments of a balloon loan are calculated with a long-term amortization of (usually) 30 years, the balloon has a relatively short life.

At the end of the balloon's term—often called the balloon's maturity—the loan will have a large loan principal balance still remaining. The borrower must either pay off, in full, or refinance this remaining balance. This final, very large "balloon" payment is the origin of this program's name.

If the property is sold during the balloon's term, the loan balance is obviously paid off completely with the proceeds of the sale.

To provide a deeper understanding of balloon loans, this article looks at three elements of balloon programs:

  1. Amortization
  2. Variations
  3. Conversion Option
Real Estate 101

Real Estate 101

This book makes it easy to not only buy a home, but figure out everything that you need to do, even get a loan. In simple and easy to understand language, it talks about where you should buy a home, what to look for in a home, how to find a home, how to get an agent, how to get a mortgage and more. This is a step by step process that you, a new home buyer, can use to purchase a home.

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