Balloon payment

Ballon payment is the huge amount of payment that remained as due at the end of the mortgage. Talking about the same, it is the loan installment usually larger than the other installments. As balloon payment is required when the previous installments did not extinguish the loan either intentionally or due to late payment.

Making balloon payment at the end of the mortgage is one of the biggest problems. Taking mortgage as an example there are many cases when lenders get nervous while lending to the borrowers with low equity. Most of the time it goes like the more money you have to put down as equity the lower the interest rates on your repayments. But not everybody of us has hundreds of thousands of dollars in hand, so we opt for balloon loans.

People with irregular income find the balloon payment provision useful for budgeting their expenses. However while taking up the type of loan, remember that at some point in the future you are going to be liable for a large, one-off hit. Thus, if you think that you are comfortable with saving all the spare money to pay off the balloon payment when it’s due then this is probably the best option for you.

How to enroll for balloon payment?

You need to sign the agreement on the specified date and the bank manager would handle the cash in your hand! If you think applying for the Balloon payment is this simple that you are dearly wrong. If not all, then in some cases, your lender will insist on providing the proofs that you can pay off any future balloon payment. He will encourage you to invest spare money in safe growth fund that over the course of time will be implied for the final pay-out of the fixed sum. Only then they would agree to lend you the mortgage. However, as long as your credit score is good, your lender has no problem providing you with the required finance.