Refinancing A Balloon Mortgage Coming Due
Refinancing a Balloon Mortgage Coming Due
Refinancing has proven to be a lifesaver for various reasons and for many people. With the housing market being stalled and you have a balloon mortgage coming due, refinancing may also be your only hope.What Are Balloon Mortgages?
Balloon mortgages are essentially short-term loans. When you acquire a balloon mortgage, your monthly payment and interest rates are based on thirty-year loan amortization schedules. That sounds good, doesn’t it? But keep in mind that these are short-term loans; they usually cover five to seven years and on the final payment date, you’ll be required to make a balloon payment. This payment will cover the entire remaining balance of your loan.If you can’t afford to do that then you’ll be forced to refinance your loan or lose your property.Factors to Consider When You Refinance Your Balloon Mortgage
In the current housing market, refinancing has become more of a challenge. Having your house appraise high enough to qualify for a new mortgage may be impossible. The only real option at this point is having your current mortgagor (lender) roll-over the loan into another mortgage. The servicer of the mortgage usually will contact you (the mortgagee) months in advance of the due date to give you your choices on refinancing.Should I get a fixed-rate loan or an adjustable-rate loan?
Your current lender may only be able to offer you a 30-year fixed mortgage. However, if you do have other options, it is best to determine which mortgage would be best for you. Can you afford a higher monthly payment? It may be better for you to get a 20-year or even a 15-year mortgage. These offer lower rates, quicker equity build-up, and a lower interest expense over the life of the loan. If you think you can sell your home soon, an adjustable-rate loan my be an option. They have a lower beginning interest rate, but will adjust after the initial time period (from six months up to 10 years---the longer the time period, the higher the rate). This may be a good way to go, especially since the Federal Reserve has already stated they plan to keep interest rate low for the next two years.Menu
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