5 years to 7 years, but the payment is based on a term of 30 years.
A balloon mortgage can be an excellent option for many homebuyers. A balloon mortgage is usually rather short, with a term of 5 years to 7 years, but the payment is based on a term of 30 years. They often have a lower interest rate, and it can be easier to qualify for than a traditional 30-year-fixed mortgage. There is, however, a risk to consider. If you take out a mortgage with a 30-year term, your monthly payments are calculated by amortizing the loan over 360 months. Balloon mortgages generally calculate payments over a 30-year term but have a maturity date (when a balloon payment is due) of three to 10 years. Although you can shop for mortgage terms in five-year increments ranging from 15 to 40 years, 15- and 30-year terms are the most common for fixed mortgages, according to MSN Money. Adjustable rate mortgages (ARMs) almost always come with a 15- or 30-year term. Different lenders may have slight variations in the terms of balloon mortgages. A typical balloon mortgage has an initial term of 5 or 7 years before the balloon payment is due, although lenders can set the term from 1 to 25 years. Some lenders require interest-only payments during the term of the loan, while others require payments that pay towards both the interest and principal. The advantage of this loan is a lower mortgage rate and payment. If, for example, 30-year fixed rates are 4.00 percent, a five year balloon mortgage might have an interest rate of 2.5 percent. For a $200,000 home loan, the 30-year loan payment would be $955, while the balloon mortgage payment would be $790. What is a Ballon Payment. A balloon mortgage is a mortgage that does not fully amortize over the term of the loan, and therefore, a large portion of the principal balance is repaid with a single payment at the end of its term (hence the term, balloon payment)). Typical terms are five or seven years.
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typical balloon mortgage terms