Question:

What are the balloon mortgage loans?

Answer:

Balloon mortgage loans are loans calculated to amortize over a longer period than the due date of the balloon.

For example, a 7 year balloon calculated to amortize over 30 years will have low payments for 7 years and then the remaining balance will be due. A 7 year balloon over 30 year amortizing period is advertised either as 7/23 or as 7/30 balloon, both meaning the same.

If the balloon mortgage loan has the option to be refinanced when the initial period expires, it will be called a convertible balloon mortgage. It will be possible for borrowers who are current on their loan and have not had late payments for the previous 2 or 3 years. With a convertible balloon mortgage, the borrower will have mortgage rate adjustment and the balloon mortgage loan will become a fully adjustable fixed rate mortgage.

Recommended helpful present and future homeowners links:
Why: Refinance to a fixed rate loan while mortgage rates are still low.
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Common misspellings: mortage and morgage