Balloon vs. conventional mortgage - Posted by Arif TX

Posted by dewCO on June 21, 2001 at 10:29:49:

There are certain specific loans where you only pay the interest, but usually balloons are set up to repay a portion of the principal too. Make the spread in interest rates is worth it. They always used to be, then there wasn’t much difference, later the spread has gotten larger again.

Will it be difficult to refinance? Don’t know. What will the property be worth then. Will you be able to qualify as easily or easier than you can now? If you improve the property and it cash flows then it should be relatively simple. However, the unknown is always what will interest rates be in that future year?
Probably safer to get an adjustable with a life time cap of 5%, where if you can’t refi, at least you won’t have to, you’ll have the payment maybe go up. The balloon would have to be much lower than the ARM before I’d choose it over the ARM.

Balloon vs. conventional mortgage - Posted by Arif TX

Posted by Arif TX on June 21, 2001 at 10:06:09:

Ok this is my first post so be gentle…
What are the pros and cons between going with a 5 or 7 year balloon mortgage or a conventional loan. I am in the market for a 4 Plex and from what I’ve heard of balloons you only pay the interest for the first 5 or 7 years. My thinking (not sure if it is right) is that you would make more money up front because of the lower payments than a conventional. Also is it difficult to get another mortgage to finance the balloon portion before it is due? Thanks in advance