Whether a balloon mortgage is a good idea or not depends very much on your circumstances and what you expect your financial position to be in the near future. This is because the nominative feature of a balloon mortgage is their substantial final payment, and they are usually quite a short-term choice when compared to the more common types of mortgage.
What Exactly Is a Balloon Mortgage?
Balloon mortgages come in a variety of forms, but the primary difference to a standard repayment mortgage is that the capital you borrow is not repaid steadily over the term alongside the interest and charges. The majority, if not all of the capital, is repaid at the end of the mortgage in one large balloon payment.
Why Would You Choose a Balloon Mortgage over a Repayment Mortgage?
Balloon mortgages can be useful for many different borrowers, but they are most commonly used when a borrower intends to refinance the balloon mortgage in the near future. This might be because the finance type they would prefer is not immediately available to them. They are also frequently used when the borrower intends to sell the security property within a few years and repay the full amount borrowed early before the balloon payment is due..
How Are the Payments Calculated?
Balloon mortgages frequently have much lower interest rates than conventional repayment mortgages. Often there is an element of the capital being repaid. They don’t always use interest-only repayments, but due to their structure and short term, there is always a significant amount at the end which is required to be repaid in full. So it is important to ensure you fully understand the repayment schedule before agreeing to the finance.
Can I Get A Balloon Mortgage from a High Street Lender?
Balloon mortgages are not usually found in the portfolio of high street lenders, so those looking for one should seed advice. When you are looking for a reputable conveyancing solicitor London and the surrounding areas boast a number of possible options.
What Are the Risks?
As discussed by Investopedia, as long as the borrower is aware of the nature of the final balloon payment, then the main risk is the possibility of fluctuations in the property market. If there is little or no equity in the property at the point that the borrower wants to refinance or sell, they could find themselves unable to meet the balloon payment.
Is a Balloon Mortgage Right for Me?
When searching online for a conveyancing solicitor be sure you choose one who’s part of the Conveyancing Quality Scheme. If you need a conveyancing solicitor London and the South East can provide a number of good choices.
By using a reputable solicitor who specialises in conveyancing, you can feel comfortable knowing that your individual needs and circumstances have been taken into consideration when deciding which kind of balloon mortgage is right for you and your future plans.