Question by reni768: Can you do a balloon payment on a mortgage and what are the consequences?
Me & my husband are looking to buy but I was wondering if you could do a balloon payment or something on a mortgage so that your payments would not be so much from the start? I know at sometime in the next 5 – 10 years we would refinance and could probably get rid of the balloon payment but Im not sure how all that works. We have never bought a house so all of this stuff sort of scares me. Any suggestions??
Best answer:
Answer by go_lc_bears
I highly recommend buying a house you can afford with a regular fixed rate mortgage. Anything else is only going to lead to trouble.
What do you think? Answer below!
really bad idea, you don’t know what or where you will be in five years, or if the market gets worse and you can’t refinance or you lose your income, stay with a fixed rate.
Most of the balloon loans do that at the five year mark or before. One important thing I want in a home is to be able to come home, sit in my chair and forget about the world of worries for a while.
If I have a loan like you describe, coming home will remind me of my world of worries.
I would recommend that you buy a less expensive home and get a fixed rate, fixed payment thirty year loan.
You will love owning a home but only if it is not a source of worry.
Never count on doing a refi to get rid of a balloon payment, who knows where the market will be then. Thats what everyone thought in the 80 during the S&L crash, people went into mtg with balloon payments and the intrest rate was at 15%, there were so many forclosures from balloon payment comming due, just like the ARM mtg. are now. Every one figured they would refi and look where they are now, in forclosure. And if you think you can save $ 50K by then your a fool. Stay with a fix rate 15 or 30 year.