What is a balloon mortgage?

A balloon mortgage is like a regular 30-year mortgage, but there’s a twist. For the first five or ten years, you pay your usual monthly amount covering different costs. After that, you’ve got to pay off the rest all at once.

The good part? You get a lower monthly interest rate, and you finish paying your mortgage quicker.

Now, why might you consider this? Well, a balloon mortgage could be a good choice if you’re pretty sure about:

• Getting a big chunk of money, like from inheritance, bonuses, or selling another property.
• Not planning to stay in the house when the big payment is due (thinking of selling).
• Planning to refinance before that big payment hits.

But, you really need to be sure these things will happen. Otherwise, you might end up short on money, facing some problems, and even risk losing your home.

If you’re thinking about refinancing, remember that interest rates can change. Also, if your house’s value drops, refinancing might not work out. Plus, getting a balloon mortgage these days is a bit difficult.