Mortgage with a balloon at the end. how to get out of it?
the balloon at the end of the mortgage is 89,000. if i were to refinance do they take that and add it to what I currently owe? I'm really wondering if i made a wise choice 4 years ago. please help
the mortgage of 113,000 goes until year 2036 then the balloon is due of 89000.
- 10 years agoFavorite Answer
Basically the best thing to do is between now & 2036 try to pay more than your minimum payment which is just interest. By 2036 you would have satisfied just the interest portion of your loan & the principal will now be due all at once.
A lot of people took out these kinds of loans for a few reasons
Because they didn't know exactly what the loan type was.
Because they were going to flip the property & wanted the low interest rate
Because they had planned on refinancing the home.
You might want to check to see if your credit rating is good enough to refinance, if not, try and bring it up so that close to the end of the loan term, you can refinance the 89,000.00 yes, you will be paying for a mortgage still but it's not a foreclosure on your credit this will help you in the long run AND because you're now trying to pay more every month it wont be 89k the bank is refinancing it's a lot less so you're credit and income don't have to be extremely high.
Good luck! Things in the mortgage industry 4 years ago were tremendously different so, don't kick yourself for the decision of a balloon mortgage.Source(s): Mortgage Professional
- Sharon TLv 710 years ago
No, you don't understand how a balloon works. If you pay no extra along the way you are scheduled to still owe $89,000 at the end of the time period when the mortgage is due. You will need to refinance the mortgage for at least that amount plus the costs of obtaining a new mortgage.
A better plan may to refinance soon while rates are historically low.
- ?Lv 710 years ago
The balloon payment can be viewed as a pause in the amortization schedule. If you re-finance at your current balance, the balloon will simply be absorbed in your "outstanding balance due"
Don't know what your choice was four years ago, but it looks like it might have been the choice of a lower interest rate for a shorter term loan. Seems like now with interest rates so very low, that it might have been a good choice. Give us more info next time.
- Genuine GuidanceLv 710 years ago
What do you mean *what you currently owe*? Usually, the balloon amount is what needs to be financed.
If you cannot finance, the house will be taken back from you.