Balloon loan mortgages in Tennessee, Missouri, Indiana,
Colorado, Mississippi, Alabama and Florida.
Balloon mortgages are fixed loan mortgages that mature (require that the loan be paid off) before the end of the normal 30 year term.
Most balloon loans are five or seven year terms, and they have an interest rate slightly below the 30 year fixed rate. A five year balloon matures after five years, and a seven year balloon matures after seven years. Nearly all balloon loans have an amortization period of 30 years. (Amortization refers to the period that it takes for the loan to be fully paid off assuming nothing extra is ever paid on the principal, and the payments are made on time.)
Like an adjustable rate loan there is the benefit of a lower rate and payment.
Also like an adjustable rate mortgage (ARM) this type of home loan is best suited for someone who is relatively certain that they will be in the home for a short period of time.
Unlike an ARM there is often a conversion feature on balloons such that if payments prior to maturity are made on time the loans will convert into 30 year fixed mortgages at maturity for a small fee.