What To Do When The Balloon Payment Is Up
A balloon mortgage makes short term property finance a little easier to afford. You pay a reduced installment and, when the time is up, you are liable for the full outstanding balance in one fell swoop – the key her is that it is short-term finance. Should you not be able to pay off the installment in one go, you will have to apply for refinancing or look at selling your home. Fortunately, refinancing is fairly simple.
Your initial payment will be determined by dividing up your loan amount over a term of somewhere between abd 15 and 30 years. The actual term of the loan, however, is a fraction of that time – generally about 5 or 10 years. The interest rate options depend on what your lender offers – fixed or variable and some contracts have a built in extension clause allowing you to extend the term of the loan at the end.
You need to realize, however, that refinancing is going to run up some costs – basically pretty much the same as what you originally paid so you are looking at higher costs in total. You are also essentially looking at paying more interest overall – this basically extends the term of the bond by an extra 10 years.
Start off by getting in contact with your bank and finding out what they will be able to do for you – you have got a basic relationship going with them and this can smooth the way somewhat. Find out whether or not an extension will be possible at all.
Should refinancing be your only alternative, be sure to look for the best deal that you can. Make sure that quotes are written to increase your bargaining power all round – you can use the written quotes to play one lender against another – this can be highly effective. Take note of not only the interest rate but what fees you will be paying as well.
Then you can make an informed decision as to which alternative suits you most. If you want to keep the installments down, take the loan over a longer period and make arrangements to pay in extra every month to compensate for the longer term. Visit lacve.com now for more guidelines.
You will need to submit the correct application form and supporting documents to your lender of choice – there won’t be much difference between this and the original loan application.