Balloon mortgages
are short-term mortgages,
which typically mature in five to seven years. With a balloon
mortgage, you make regular monthly payments during the mortgage
term, but the payments are often interest-only. At the end of
the term, you have to pay the full remaining balance on the loan.
Or, depending on your lender, you may have the option of converting
the loan to a fixed-rate loan upon maturity.
This kind of mortgage often appeals to buyers
who plan on staying in their home for only a few years. But the
balloon payment can be a serious burden if rates go up or if you
are having credit problems when you must
refinance.
