What is a Balloon Mortgage?
Interest rate remains fixed for the initial period, such as five years for 5/25 Balloon. The payment is amortized over a 30-year period. At the end of the initial period, the balance is due and payable (loan must be paid or refinanced) or the member may request the “Reset” option. If the loan meets certain conditions, the credit union will adjust the interest rate to .5% over the current fixed rate and re-amortize the remaining balance over the remaining term.
A balloon mortgage is a mortgage that is amortized over the full term of the loan repayment period but at the end of a specified period the balance of the mortgage comes due. Thus, a balloon payment needs to be made. For example, with a 7-year balloon you would make monthly payments for seven years that have been calculated based on a 30-year mortgage payment. At the end of the 7 years, the remaining principal balance would be due and payable in full.
A balloon mortgage is a mortgage that is amortized over the full term of the loan repayment period but at the end of a specified period the balance of the mortgage comes due. Thus, a balloon payment needs to be made. For example, with a 7-year balloon you would make monthly payments for seven years that have been calculated based on a 30-year mortgage payment. At the end of the 7 years, the remaining principal balance would be due and payable in full.
