| Calculators >> Balloon
Mortgages
A balloon mortgage can be an excellent option for many
home buyers. A balloon mortgage is usually rather short,
with a term of five to seven years, but the payment is
based on a term of 30 years. They often have a lower interest
rate, and can be easier to qualify for than a traditional
30 year fixed mortgage. There is, however, a risk to consider.
At the end of your loan term you will need to pay off your
outstanding balance. This usually means you must refinance,
sell your home or convert the balloon mortgage to a traditional
mortgage at the current interest rates.
Definitions
- Mortgage amount
- Original or expected balance for your mortgage.
- Interest rate
- Annual interest rate
for this mortgage.
- Term
in years
- The
number of
years over
which you
will repay
this loan.
The most
common balloon
mortgage
terms are
5 years and
7 years.
After the
mortgage
term is complete,
you will
then need
to refinance
or pay off
the remaining
balance.
- Monthly
payment
- Monthly
principal
and
interest
payment
(PI).
The
monthly
payment
is
calculated
using
a
30
year
term.
- Total
payments
- Total
of
all
monthly
payments
over
the
term
of
the
balloon
mortgage.
This
total
payment
amount
assumes
that
there
are
no
prepayments
of
principal.
- Total
interest
- Total
of
all
interest
paid
over
the
term
of
the
balloon
mortgage.
This
total
interest
amount
assumes
that
there
are
no
prepayments
of
principal.
- Prepayment
type
- The
frequency
of
prepayment.
The
options
are:
none,
monthly,
yearly,
and
one-time
payment.
- Prepayment
amount
- Amount
that
will
be
prepaid
on
your
mortgage.
This
amount
will
be
applied
to
the
mortgage
principal
balance,
based
on
the
prepayment
type.
- Start
with
payment
- This
is
the
payment
number
that
your
prepayments
will
begin
with.
For
a
one
time
payment,
this
is
the
payment
number
that
the
single
prepayment
will
be
included
in.
All
prepayments
of
principal
are
assumed
to
be
received
by
your
lender
in
time
to
be
included
in
the
following
month's
interest
calculation.
- Savings
- Total
amount
of
interest
you
will
save
by
prepaying
your
mortgage.
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tools for your independent use and are not intended to provide
investment advice. We can not and do not guarantee their
applicability or accuracy in regards to your individual circumstances.
All examples are hypothetical and are for illustrative purposes.
We encourage you to seek personalized advice from qualified
professionals regarding all personal finance issues.
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