Thank you for your suggestion.
I talked with the morgage broker again and his explanation is that this BML ( Program 105 and 107) has a reset option that allows me to recap the loan at the term( 5 or 7 yrs). So, there is no refinance fee involved,just $250 processing fee. Basically, he says this is extendable Balloon and once you reset the rate after the term, it will keep the same rate for the rest of the 25 yrs. Does this sound right to you?
I didn’t know if there are plain Balloon morgage and “Extendable” balloon morgage.
Urgent Help! Balloon payment for the 1st 5yrs - Posted by Eri Makimura
Posted by Eri Makimura on April 16, 2003 at 14:20:33:
Hi.
I am thinking of refinancing my condo because the current rate is pretty good. My current loan balance is about 63K and the property appraised value is about 110K or so.
I am thinking of selling this place within a couple of years.
I found a morgage broker that can give me 4.75% 5/25 Balloon morgage loan. So, this will lower my monthly mortgage payment from app. $660 to $550 or so( principal&Interest and tax). HOA dues are separate.
However, I am not so familiar with the risk of balloon.
The broker says if I am planning on selling it within 5 years, it won’t even affect to me and I can just enjoy low monthly payment. Is it true? Even if I still own it after 5 years, he says that I can just refinance ( extend the loan at the rate of that time).
Please let me know if this is really the case or if I am missing any risky points.
Why don’t you just get a 3 or 5 yr. adjustable? It stays fixed for the first 3-5 years and then it will adjust. The max. it will probably adjust the first time is 2%, but the likely hood of it adjusting that much is unlikely. If the balloon makes you uncomfortable then the arm is a good option with similar rates for the time period. If you do have a chance of keeping the property, you won’t have the costs of refinancing ($2500-4000) with an adjustable.