Fairfax County VA Home Search Website Blog

If you’re in the market and looking to buy one of the Fairfax County VA homes for sale, you’ll come across different mortgage types.  One type of mortgage is called a balloon mortgage.

What is a Balloon Mortgage?
A balloon mortgage is a loan payment that expands after a certain term is expired.  It’s similar to a long-term fixed rate mortgage (FRM), but has a delayed increase in payments at the end.  It also has a lower debt repayment than a conventional FRM loan

Example of a Balloon Mortgage
Let’s say that you’re considering a Fairfax County, Virginia, home that costs $250,000.  With a ten-year balloon mortgage, you might pay $500 per month for ten years, a total of $60,000.  This leaves you with an outstanding debt on the house of $190,000.  At the end of the seven years, you then have two options:  pay the outstanding amount in full (hence the name “balloon”) or refinance.

Why a Balloon Mortgage?
In general, homeowners choose balloon mortgages with the expectation that they can refinance before the end of the term.  They expect a raise in income to help them with later term balloon payments.  Another reason people choose balloon mortgages is if they don’t plan on keeping the property for more than a few years.  It’s a good short-term, low-cost way to afford the home.

Things to Keep in Mind
When considering a balloon mortgage, there are several things to keep in mind:

• If housing interest rates go up, you have to refinance at a higher rate; this would mean that paying off the principal might take longer and that your payments would increase.
• If rates spike five percent or more during the term, your qualifications may have to be reappraised.
• If you lose a major source of financing or are expecting an income increase that doesn’t happen, you could be stuck with huge payments later on.
• Just because your contract allows the potential to refinance, it doesn’t mean that you can’t lose that potential.  Make sure you know how and why you might be disqualified from refinancing.

No matter what type of mortgage you choose when you’re buying one of the Fairfax County VA homes for sale, always make sure to read the fine print, as well as investigate the lender before signing on.

Let me help you choose the best home and mortgage for you.  Order my Free book or CD and learn the buying process from start to finish.  Call me today at 703-909-3939 or email me now at Steve@HomeSearchWebsite.com.

Steve Hawkins
Long and Foster REALTORS®
Springfield, Virginia
www.HomeSearchWebsite.com
Steve@HomeSearchWebsite.com
703-909-3939