Balloon Mortgage Loan Calculator Overview
A balloon loan usually has a shorter term than a traditional fixed rate or adjustable rate mortgage. While is can be an excellent option for some home buyers, it is not beneficial to others. A balloon loan usually has a term of five to seven years, but the payment is fully amortized and based on a 15-year or 30-year term. Balloon mortgages usually have a lower interest rate than other types of mortgages, which also makes balloon mortgages easier to qualify for than a traditional 30-year fixed rate mortgage.
The main difference between a traditional mortgage and a balloon loan is that at the end of the term of the balloon loan (five to seven years) the borrower is required to pay off the outstanding balance on the loan. Since most borrowers cannot afford to pay off a large lump sum at the end of the term this usually means that borrowers must either refinance, sell the home or convert the balloon loan into a traditional mortgage at the current interest rate.