When you have plans of fulfilling your dreams and wish to buy a house, you would definitely want to have several options. Normally, you would first secure where you can get your finances. Applying for mortgage or any financial assistance would be your first step. A good suggestion for you would be the balloon mortgage since this is said to be the most beneficial among other types of financial assistance. But of course, there would always be drawbacks in every option. So you have to think it over first before you apply for it.
Balloon mortgage is a type of mortgage that has low first monthly payment. Most would call this as a hybrid compared to fixed mortgage loan and adjustable type of loan. For the reason that the first monthly dues are stable but it can be adjust once you reach the agreed time.
A lot of aspiring homeowners are encouraged to apply for this because of its low monthly dues. However, this has limited period. Once the agreed time is done, the borrower will have to pay balloon payment of the existing balance of the loan. Hence, this is what others would call a drawback. The borrower will not always have to pay for the due because of the big amount that must be settled.
You might wonder when you will consider this option. Well, this can be best when you have plans of transferring from such house later on. Having cheap initial monthly dues is best if you are thinking of selling the house within three years. This is also beneficial if you know that you will have higher earnings later on.
As soon as you have decided that you will go for this type of mortgage, then you can begin gathering the necessary documents and look for possible lender. You have to keep in mind that you must compare the rates first and identify who offers the best. No need to worry about the application process since this has similar steps with other mortgages. Thus, if you are not a first time loan applicant, you will have already an idea how to go about the procedure.
Apart from the terms and rates of the lender, you also have to go through the content of the agreement before you affix your signature on the contract. It is important that you are aware of the dues. Normally, cheap initial monthly dues will reach up to seven months.
Do not forget to know the time when you have to make the balloon payment so you can be prepared for it.
Usually, borrowers will borrow from other lenders so they can pay off the balloon mortgage. But there are lenders who prohibit this. So it is really very important that you go over the terms and conditions of the contract first.
Since this is a risky mortgage plan, you need to have another option so you can be saved in the event that you can not settle the dues on time. Make sure that you have enough savings for the balloon mortgage so that you will not get drowned by your dues.
Consider everything first before you enter into this type of agreement so there will be no hassles in the future.