Balloon mortgage, any experience?

[NancyP]

Maybe I should clarify. The property we want does not meet the criteria for normal loans because it has 2 houses on it. The price is about 150,000 below what we qualify for. So affordability isn't the issue.

 

[Rosalind]

Nope. Don't do it. Sometimes even supposedly reputable banks will try to offer you that first. You can find a good fixed rate, shop around. My supposedly reputable Very Large Bank with whom I had been banking with for several years attempted to offer me a balloon mortgage, and I turned them down, got a decent fixed rate from someone else--my credit score is in the low 800s and I had 10% down. Astonishingly

the Very Large Bank required a bailout, while the one that gave me a fixed rate did not. I can't imagine why...

 

[JennsPeeps]

In that case:

1. do an internet search on "balloon mortgage" to find out how it'll work
2. figure out the amortization for this property & when you'll get the big bills
3. run your numbers again and see if they work

 

[The Poultry Peanut]

Quote:
try here to see if you can get a fixed rate mortgage
http://www.churchillmortgage.com/commonframe.php

 

[NancyP]

Thanks, I will call them tomorrow.

 

[The Poultry Peanut]

no problem!!

 

[CarriBrown]

Quote:

Why they wouldn't give someone with that credit a loan is beyond me. They were handing out loans to people off the street just a year ago.

 

[The Chicken Lady]

Quote:
I agree. The balloon mortgages are the reason why so many people are in foreclosure now. I am surprised any company is even offering them.

You don't want ANYTHING other than a fixed-rate mortgage. If you can get an assumable mortgage, that's even better. (Yup, they're giving those to people now! Hasn't been done for years, but they brought it back!)

 

[DuckLady]

We have a balloon payment mortgage due on our second house in 10 years. It is an owner carried loan at a low rate.

BUT!
We still own our first home and the equity (even in these times) is more than double both mortgages combined. We are renting it for 2 years and then will probably sell it if the market turns.
In the meantime, we are making double payments on this house to lessen the balloon. And when we sell our other house, we will pay it off, of course.

There are times when a balloon payment is not such a high risk and you need to have your ducks in a row before entering into one.

 

[LilBizzy]

The previous owners of my first house held a lower rate balloon mortgage. The house was a fixer-upper, and we figured there would be no problem refinancing in 5 years when the balloon burst.
We were young ( 18 and 19), and this was a good opportunity.

Until the 5 years was up- and we tried to get a loan. It seems there was something with the zoning being commercial, but the residence was grandfathered in.. and no one, and I mean NO ONE would give us a loan. You know that commercial that says " When everyone else says no, we say yes"? They lied LOL
Luckily, the previous owners were willing to extend the loan, otherwise they would have gotten the house back, and I'd have been very homeless. A few years later, I was able to get a home equity loan to pay off the mortgage. Even that was tricky, though.

Anyway, I'd not recommend a balloon in todays shaky market. You never know what the house will be appraised for 5 or 10 years from now, which could mean the difference between refinancing or foreclosure.