Question:

Should I take a second mortgage balloon?

Answer:

No. Balloons are loans that look pretty attractive with low payments for a definite period and a lump sum due in the end, and a second mortgage balloon makes no exception.

If you need teaser starting rates on your second mortgage, try a Hybrid or Option ARM, or a HELOC (home equity line of credit). They make more sense and you are not getting stuck with a huge lump sum payment in 10 years.

Balloon payments and prepayment penalties are something clearly to avoid when taking a mortgage loan. A second mortgage loan balloon option is acceptable if you have not accepted a penalty should you choose to refinance before the balloon is due.

Avoid balloon payment on a home equity loan or line of credit.

If you are in need of a home equity loan, generally a second mortgage, a home equity loan (HEL) or home equity line of credit (HELOC) are going to be the options. A HEL or traditional second mortgage makes sense if you need funds to sponsor a single big purchase; a HELOC makes sense if you are going to need funds on revolving basis. However, avoid the balloon feature of the loan, if you don't have a particular idea how to fund it when it comes due.

Recommended helpful present and future homeowners links:
Why: Refinance to a fixed rate loan while mortgage rates are still low.
Link:
Why: Because FHA loans are insured by the US Federal Government they have very competitive interest rates and are easier to qualify.
Link:
Why: Know and protect your credit report and score.
Link: See All 3 National Credit Scores & 3 Reports Instantly, Online & Free
Why: Find your next home and save money.
Link: Search thousands of foreclosures. Free 7-day trial.
Link this QnA Print del.icio.us Digg
Was this Mortgage QnA helpful?
Not at all
  • Currently 3/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
 Definitely
Add to this Answer

Mortgage QnA is not a common forum. We have special rules:

  • Post no questions here. To ask a question, click the Ask a Question link
  • We will not publish answers that include any form of advertising
  • Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
If you have trouble reading the code, click on the code itself to generate a new random code. Verification Code Above:
Bookmark and share this QnA:

Common misspellings: mortage and morgage