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Copyright © 2006 by
Bob Schwartz
San Diego
real estate broker
Certified
Residential Specialist
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Blowing
Up Bills With Balloons
By Bob Schwartz, CRS, GRI, San Diego real estate broker
If you aren't familiar with options for financing, it is never too late to find
out about them. Comprehending the different terms and having the ability to
relate them to each other will help you to evade situations that are not
financially possible. One of the terms that you should know is "balloons". This
can either aid you financially, or cause you trouble. Understanding the details
of how balloons work and using them to your advantage will give you the ability
to select the right loan.
Balloons are used as tools to decrease monthly payments. It does this by
consolidating a specific percentage of your loan each month. At the close of
your entire loan, you will pay the additional percentage that is left.
Generally, this will equal about half of the loan that you have.
You can work with balloons to your gain if you have the right finances in place.
If you know that you will have a significant amount of money at the end of your
loan term, then having a balloon can help you to save now and form your
credibility with financial investments later.
If you aren't certain of your financial status and what it will be in a few
years, then a balloon will most likely not help you. Because you will need to
pay a large amount at the end, it can lead you into debt and won't help you to
make an investment on another house in the future. In accordance with this, if
you are making a particular amount now but know that you will be making more
later, then you can use a balloon in order to stabilize your financial
conditions.
By using a balloon, you will be put into a situation where your mortgage will
expand to twice as much at the end of the term. This can be a gain or a
disadvantage, depending on your situation. By understanding precisely how to
seal the end of the balloon, you will be able to find the best financial options
for your situation.
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