Question:

What is a 30/15 year balloon mortgage?

Answer:

The 30/15 year balloon mortgage is a home loan for which the monthly payments are calculated over a 30-year period but are paid for the duration of 15 years. After this period expires, the remaining part of the loan, namely the ‘balloon', will be due in full.

Balloon mortgages are considered an alternative for the ARMs, which also allow for lower initial payments. Balloon mortgages are convenient in case you plan to refinance before or when the balloon comes due, or sell the house. You may like to discuss with your lender what the refinancing costs will be and see if you will be able to meet those costs when the balloon term approaches.

Some mortgage brokers may directly offer you an extendable option, for example a 30/10 extendable balloon. At the end of the ten-year period, you will be able to either pay the balloon, or refinance into a new fully amortizing loan, or remain with this mortgage paying some additional charge to lock into a new loan agreement.

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