How is a balloon different from an ARM?
The balloon adjusts to the current 30 yr. Fixed rate, plus a small increase, at the end of the initial term, for the remainder of the loan. Certain conditions apply that must be met by the borrower at that time. • Why do I have to pay money at closing? If you decide not to roll any costs or prepaids (taxes, insurance and interest) into the loan amount, those monies are due at close. • If I pay extra on my principle how many years will that cut down on my mortgage? That depends on how much you pay. Your loan executive can calculate that for you. If you make (1) extra mortgage payment per year, it will shorten your amortization by approximately 7 years. • How can I avoid PMI? Use two loans if necessary. The 1st mortgage at 80% of the appraised value (LTV – Loan to Value), and the balance on a 2nd mortgage, such as a Home Equity Line of Credit (HELOC). The two combined are called CLTV (Combined Loan to Value) which can be over 80%…the Private Mortgage Insurance (PMI) threshold. • Why sh
