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A balloon mortgage can be an excellent option for many homebuyers. A balloon mortgage is usually rather short, with a term of 5 years to 7 years, but the payment is based on a term of 30 years.
As an added bonus, rates on most balloon loans are usually one-quarter to one-half point lower than rates on 30-year mortgages because the lender’s risk is lessened by the early payoff date. The.
Let’s look at an example of a balloon mortgage: 7-Year Balloon Mortgage Interest Rate: 5.00% Amortization: 30 years loan Amount: $250,000 In the above scenario, the monthly mortgage payment would be $1,342.05 per month, which is the same exact amount as a standard 30-year fully-amortizing payment.
An alternative to a balloon mortgage is its close cousin, the adjustable-rate mortgage, or ARM. The typical ARM, for example, can have a fairly low interest rate that’s similar to the balloon.
Press the Balloon Only button and you will see that you can pay off the mortgage with a balloon payment of $66,328.13. You are getting a $150,000 mortgage loan with a 3 year fixed interest rate of 4.5%.
Here’s some of the details of the payments they could expect with a balloon mortgage as well as with 30- and 15-year fixed-rate home loans, as well as a 5/1 adjustable-rate mortgage.
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Remember this payment schedule that we set up is based on a 30-year amortization, just as if we were doing a 30-year fixed rate mortgage. But in the balloon payment, if you had a 10-year term with a 30-year amortization, the payments are the same, but after the 10 years, at the end of the loan you don’t just make that 120th payment, you have to.
Mortgage Balloon Payment Calculator Sale Price: Down Payment:. The annual percentage rate you will pay for this loan. The length of your balloon mortgage or loan. Your balance or ‘Balloon Payment Amount’ will be due at this time. Also choose whether ‘Length of Balloon Period’ is years or months.
)))*(i/(1-((1+i)^{-n}))) {/eq} where PV equals the loan amount of $100,000, the balloon amount is $20,000, i is the interest rate (5%) and n is the years (5%). Monthly conversions: i=(.05/12)=.00417;.