Homeowners in New York usually have a mortgage on their houses, as buying a house in New York is an expensive affair. People who require raising some money against their houses may purchase a mortgage. There are many types of mortgages that the borrowers can choose from namely fixed rate mortgage loans, adjustable rate mortgage loans, balloon mortgage loans and sub-prime mortgage loans.

Balloon mortgage loans usually offer a lower interest rate than the prevailing rate for a fixed term initially. After this term is over, borrowers are required to repay the full amount of the mortgage, in one single payment. This final single payment is termed as balloon payment. Balloon mortgages are short-term loans with fixed interest rates with fixed monthly payments. The monthly payments are calculated on the basis of a thirty-year repayment mortgage plan. The terms for balloon mortgages can be three, five or seven years. After the end of the chosen term, the full balance of the mortgage may be paid off in one lump sum.

The major advantage of balloon mortgages is that the interest rate offered is usually the lowest possible in the market. This means lower monthly payment for borrowers. However, the biggest drawback associated with this type of mortgage is that the final payment turns out to be a big amount, for which borrowers might have to opt for a refinancing option, if they can not afford the payment.

Borrowers can take the balloon loan with a refinance option, and can have the outstanding amount converted into a fixed rate mortgage. To obtain the refinance option, there is no need for re-qualification of the borrower or re-approval of the property. The interest rate offered for this new loan will be same as the current market rate. The lender might charge a small processing fee to convert the final amount into a fixed rate mortgage loan.

Balloon loans are ideal for borrowers looking for an initial lower rate and are willing to take the risk of taking a fixed mortgage rate few years later.

New York Mortgages provides detailed information on New York Mortgages, New York Mortgage Brokers, New York Mortgage Companies, New York Mortgage Rates and more. New York Mortgages is affiliated with New Jersey Mortgage Companies.

¶ 4:26 PM