Depending on your financial status, future prospects, and overall profile, a balloon mortgage loan in the Greater Boston Area might be the perfect loan for you or it could be a big financial mistake that will cost you in the future. Deciding in which category you fall requires at first a thorough understanding of the loan and its characteristics, second an analysis of its pros and cons.
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Pros of a Balloon Mortgage Loan in the Greater Boston Area
- Easy to Qualify for a Higher Loan Amount: Unlike a normal fixed interest rate mortgage loan or an adjustable rate mortgage loan where you might be eligible for only a certain amount of money based on your current financial profile, with a balloon mortgage loan it is easy to qualify for a larger loan amount based on the same financial profile. This is because you will not be repaying the entire principle during the term of the loan. It means that the amount of financial pressure you will be obligating yourself to (at least in the short term) will be lower, so that you will be eligible for a larger amount.
- Lower Monthly Payments: No matter the exact characteristics of your mortgage loan, the amount you will have to pay in your monthly payments will be much smaller than the payments you would have had to make in a normal mortgage loan. This will allow you a lot of financial freedom during the term of the loan to re-invest that money or use it for any other purpose i.e. you have the freedom of choice.
- Balloon Payment Date Not Fixed: With most balloon mortgage loans, the payment of the balloon amount is not restricted by any hard and fast rules. You can repay the balloon amount at any date within the time period of the loan as long as you make the payment at the end of the term period if you have not paid it until that date.
Potential Drawbacks of a Balloon Mortgage Loan in the Greater Boston Area
- Low Time Period of Loan: Unlike normal mortgage loans that allow you to repay the loan in 15 to 30 year time periods, the time period of most balloon mortgage loans is 7-15 years. Because of the smaller amount of time for the loans repayment, not everyone can cope with the large balloon payment that must be paid at the end.
- Foreclosure Prospects: If you cannot repay the loan, sell the property, or refinance, you will have to foreclose your home.
- High Interest Rate in Refinancing: If you decide to refinance the loan, you might find that the current prevailing interest rates are much higher than the interest rate that you were paying during the term of the loan.
As is evident from the above, a balloon mortgage loan has its fair share of pros and cons. So before making your final decision, understand your unique profile and the feasibility of such a loan from your perspective. If you feel you cannot judge this by yourself in a logical manner, contact and talk to a Boston mortgage lender.
Lender Tip: Looking for a mortgage loan in the Greater Boston Area? Feel free to contact us with any queries.