What is a balloon mortgage? A balloon mortgage is a fixed-rate loan where principal and interest are calculated over a 30 year period. The main difference between a 30 year fix and a balloon mortgage is the number of years you have to pay. For example, for a 7 year balloon, while payments are similar to a 30 year fix loan, by the end of the 7th year you have to PAY OFF THE REMAINING BALANCE.
This type of mortgage is good for people who plan to sell the home before the term expires or they plan to refinance. Just remember, when you refinance, there are closing costs and other fees involved.
