A balloon mortgage has an interest rate that is fixed for an initial amount of time. At the end of the term, the remaining principal balance is due. At this time, the borrower has a choice to either refinance or pay off the remaining balance.
There are no penalties to paying off a balloon mortgage loan before it is due. Borrowers may refinance at any time during the life of the loan.
Balloon loans typically have either 5 or 7-year terms. For example, a 7-year balloon mortgage with an interest rate of 7.5% would feature this interest rate for the entire term. After 7 years, the remaining loan balance would become due.
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JJ Mazzo
Sr. Mortgage Advisor
NMLS186548 / AZ MLO Lic# 0913442
CrossCountry Mortgage
31351 Rancho Viejo Road,
Suite 201, 202, 203, 207,
San Juan Capistrano, CA 92675
NMLS3029 / NMLS1790854
An Equal Housing Opportunity Lender / www.nmlsconsumeraccess.org