When homebuyers in Illinois go to purchase a new home with the help of a real estate attorney in Gurnee, one financing option available to them is a balloon mortgage. These loans require a payment at the end of a specific time period that is larger than the regular monthly mortgage payments.

Typically, the balloon payment is twice as much as the loan’s average monthly payment and can often equate to tens of thousands of dollars.

The benefits of a balloon mortgage

There are many benefits associated with acquiring a balloon mortgage instead of a fixed 15 or 30-year mortgage. These include some of the following:

• Balloon mortgages generally have lower interest rates.
• Those who acquire a balloon mortgage may be able to make lower monthly payments on the loan.
• Buyers may qualify for a larger loan amount with this type of loan than if they had acquired a fixed-rate or adjustable-rate mortgage.

These mortgages can be particularly useful for those working with a real estate attorney in Gurnee who do not have very much cash at present, but who expect to receive a large amount of capital by the time the term ends and a balloon payment is due. These loans can also be beneficial for those who intend to sell their home before the loan expires.

Risks to keep in mind

Although acquiring a balloon mortgage can be advantageous, these loans still carry several risks. For example, if a homeowner cannot pay off the loan’s principal in one lump sum, he or she may be forced to refinance. Additionally, since a homeowner is not required to pay down a large portion of the loan’s principal during the life of the mortgage, he or she may have a large financial obligation to pay at the end of the loan term.

Those who are in the midst of purchasing a new home should not assume that they will be able to refinance their loan or sell their home before they are required to make a balloon payment. In some situations, selling or refinancing is not possible if the owner’s financial condition declined or if the value of the property fell. Future homeowners who are unsure of how they would be handle the balloon payment when it is due may want to consider taking out another type of loan.

Determining whether to go with a balloon mortgage or another type of loan is a large decision that should be approached with care. Those who are interested in a balloon mortgage should consider turning to a real estate attorney in Gurnee for legal assistance with this decision.