Balloon mortgage is a type of short term mortgage. As the name indicates balloon mortgage requires borrowers to pay remaining amount of mortgage collectively in the form of inflated installment. Actually balloon mortgage works with a strategy where the borrower can acquire a short term mortgage and pay the regular repayments of the mortgage after regular interval of time. However at the end the remaining amount of mortgage is to be paid by the borrower as a single installment within a relatively shorter interval of time. The example of the balloon mortgage can be the short term loan mortgage for a time interval say 10 years and the borrower has to pay interest repayments each year however the last and the final payment is without interest and the borrower has to pay it within six months in order to pay off the entire principle amount of the mortgage. This is in the form of a last big installment at the end.
There are a number of options attached with the balloon mortgage for example a balloon mortgage can come with the mortgage installments that are spanned over a time period of 30 years. The installment will be the fixed rate installments for each year and there is always an option of early payments as well. The debt repayment associated with the balloon mortgage is far less than the payment associated with the debt repayments of fixed mortgage. With the passage of time balloon mortgage take the form of the interest only loans or partially amortizing mortgages.
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