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Instead, they usually decide to sell the home, refinance it, or convert the balloon mortgage to a traditional fixed-rate or adjustable-rate mortgage. Some balloon mortgages are built with specific conversion options, such as a 5/25 convertible balloon loan or a 7/23 convertible balloon loan.
"Although not as popular as they were before the mortgage crisis, a balloon mortgage is still an option for homebuyers. These loans can be tempting, since they tend to come with lower interest rates.
Balloon Mortgage Formula Balloon Loan Calculator for Excel – Vertex42.com – A balloon loan or balloon mortgage payment is a payment in which you plan to pay off your auto or mortgage loan in a big chunk after a number of small regular monthly payments. To determine what that balloon payment will be, you can download the free excel template below which calculates the regular monthly payment and balloon payment for a loan period between 1 and 360 months (30 years).
30-Year Fixed Mortgage with 15-Year Balloon This fixed-rate mortgage is otherwise known as a 30/15. It is amortized like a 30-year mortgage, but at the end of 15 years, the remaining balance (a.k.a. the balloon) comes due. This means you would need to pay off the loan, sell the home or refinance within 15 years. Balloon Mortgage Benefits
Home purchase: balloon loans can also be useful when buying a home. In some cases, a payment is calculated for an amortizing 30-year mortgage, but a balloon payment is due after five or seven years (with only a small portion of the loan balance paid off). In other cases, borrowers pay interest-only until the
At the end of the interest-only mortgage term – in this example 10 years – you might be able to refinance the balance into a new loan if a more favorable interest rate is available, but that’s an assumption that you probably shouldn’t make before taking out an interest-only loan.
A mortgage with a balloon payment can be risky because you owe a larger payment at the end of the loan. If the value of your property falls, or if your financial condition declines, you might not be able to sell or refinance in time before the final balloon payment comes due.
After careful analysis, the couple ditched their 7-year-old balloon mortgage with its 5.375 percent interest rate in favor of a 4.75 percent, 20-year fixed rate. Their monthly payments have risen.