The Downfalls of the Balloon Mortgage Explained
Many people don’t fully understand the terms of Mortgages that they are agreeing to when they buy homes (especially the Balloon Mortgage). This may lead to foreclosure, when repayment becomes burdensome and/or impossible. The conventional thirty (30) year fixed mortgage is fairly straightforward and allows most homeowners to refinance the mortgage and/or pay off and/or sell the property before that thirty (30) year period is over. However, not many people understand the “too good to be true” balloon mortgage.
The balloon mortgage starts off with a lower interest rate (or interest only) and a payment plan that is extremely affordable to most individuals. The number of years for such mortgage can range. The main pitfall to this type of mortgage is that upon the loan’s maturity, the full balance (principal and interest) of the mortgage and promissory note becomes due. That is the case regardless of whether the homeowner has the money to pay for such acceleration in payments. In essence, a homeowner can pay a low cost of $500.00 per month for ten (10) years, and at the end of that tenth year, $100,000.00 can be automatically due to the Lender (within the regular late period terms). This situation may lead many individuals into foreclosure and/or bankruptcy since they cannot pay this lump sum. More so, individuals who pursue these types of payment plans are typically not financially well off to begin with and paying the “balloon” payment or amount due upon the maturity of the loan may cripple their finances.
Therefore, homeowners should be very wary of the balloon payment and/or interest only loans. Homeowners need to really look into the future and determine whether they will have the financial resources to re-pay the loan once the maturity date is reached.
Accordingly, homeowners who are near their maturity date or at their maturity date with a balloon mortgage should contact a knowledgeable foreclosure attorney to ensure that their rights are being represented. Also, a foreclosure attorney may be able to provide a homeowner with options (that the homeowner may not have known existed) in order to preclude their home from entering foreclosure.
If you or someone you know is in jeopardy of foreclosure, contact the attorneys of the Ticktin Law Group to assist immediately. Our attorneys offer complimentary consultations and are here to help you!