Balloon loans are a relatively new mortgage instrument recently introduced to the home financing and mortgage market. Balloon loans have been developed to allow greater flexibility when it comes to figuring out the best way to pay on mortgages for people needing a bit more leverage in their payments. Financial experts assert that this type of loan brings about a balance of payments offered with greater leverage as loan maturity dates approach. These new financial instruments perhaps could be best categorized as adjustable rate mortgages for people with poor credit.
Of course, many in the United States home mortgage industry have seen these balloon loans gain in popularity with lenders and borrowers alike. Especially those marketing and using loans for low credit borrowers. Also, many occupants who would normally lease an abode, find themselves using the balloon loan as an alternative. This makes sense in that leased properties must endure property taxes and the balloon loans make the lessor an owner and as such they get to enjoy reduced tax rates. These balloon loans provide lower initial interest rates so users can reliably weather any immediate financial storms.
How Flexible Are the Terms?
Flexibility regarding interest rates makes these loans particularly useful for folks with poor credit histories. These mortgage instruments combine the usual useful features of a long-term fixed rate mortgage with the short-term variable rate mortgage. The initial term provided to the poor credit folks is usually leveled at around five to seven years. If they choose at that point, they can be adjusted to a lower rate with a 30-year amortization.
Also, an option exists for these borrowers to pay the full amount due at the maturity date. So, in some instances, a significant payout could be required at the end of the initial time period. The loans are extremely flexible in their structure in ways that are appealing to poor credit homeowners. By comparison, rates of interest imposed by balloon loans for poor credit borrowers are quite a deal lower than those imposed by other mortgage instruments in the home loan market today. So, these mortgages are built especially for those who would not qualify for the other low interest loans available.
Can a Balloon Loan Replace My Old Mortgage?
Folks with low or poor credit scores, could use balloon loans to replace or take over existing home loans or mortgages. This could be especially helpful for those who are facing foreclosure under their present home loan or mortgage. So, along with rescuing a home from foreclosure, the new balloon loan could offer cheaper interest rates than those the homeowner could get among the loans in the general marketplace.
The fact is, if a homeowner is facing a foreclosure, especially if he or she is operating under a poor credit history, taking a balloon loan to refinance the home would make the situation a lot easier for the financier and the borrower alike. Many homeowners are feeling the tug on the purse during these recessionary times, those with poor credit and facing foreclosure should give balloon loan serious thought. As with any difficult time, it is wise to seek legal assistance or the assistance of a real estate professional.