5/12/2008

Other Mortgage Programs

		7 Year Balloon Mortgage With a balloon mortgage, you start by making payments as you would with a full-term loan, but after a certain period the balance of the mortgage comes due. With 7 Year Balloons:
			Your mortgage is amortized over the full term of the loan repayment period.
			At the end of a specified period, the balance comes due — a balloon payment needs to be made.
			So with a 7 year balloon, you would make monthly payments for seven years that have been calculated based on a 30 year mortgage payment plan.
			At the end of those seven years, the remaining principal balance is due and payable in full.
		Advantages: You’ll get a lower price on the loan, which will increase your buying power — and remember that your payments will be calculated as if the term were 30 years. You’ll also usually have a conditional right to refinance after seven years, though on average most owners will have already made a change. If you know you have a lump sum of money on the way (such as an inheritance, bonus, or dividend payment), if you expect to relocate in a short period of time, or if you simply think you’ll be in a better position to refinance later, this may be a choice worth your consideration. Disadvantages: If you plan on keeping this property for longer than seven years, a longer-term loan may be a stronger choice.