Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
Balloon loans are short term mortgages that have some features of a fixed rate mortgage. The loans provide a level payment feature during the term of the loan, but as opposed to the 30 year fixed rate mortgage, balloon loans do not fully amortize over the original term. Balloon loans can have many types of maturities, but most balloons that are first mortgages have a term of 5 to 7 years.
At the end of the loan term there is still a remaining principal loan balance and the mortgage company generally requires that the loan be paid in full, which can be accomplished by refinancing. Many companies have other options such as a conversion feature at the end of the term.
For example, the loan may convert to a 30 year fixed loan at the thirty year market rate plus 3/8 of a percentage point. Your conversion can be guaranteed based on certain criteria such as having made your last 24 payments on time. The balloon mortgage program with the conversion option is often called a 7/23 Convertible or 5/25 Convertible.
- What To Do When Mortgages Default
- Short Selling a Rental Property
- FHA Eligibility with Bankruptcy and Foreclosure
- Should You Refinance? Make Sure the Timing is Right
- 3 Warning Signs of Loan Modification Scams
- Home Equity Loans for People with Bad Credit
- 3 Factors that Can Negatively Affect Your Mortgage Application
- Second Mortgages: Advantages and Disadvantages
- What Lenders Don't Reveal About Home Equity Loans