Balloon Mortgages

Balloon mortgages are similar to two-step mortgages in that they offer a low interest rate for a predetermined number of years (also frequently in 5/25 and 7/23 formats). At the end of that term, the borrower must refinance the loan or pay it off (in some cases, they may qualify for an automatic conditional refinance). The rates on these programs are even lower than those in their corresponding two-step programs. Balloon mortgages are excellent for people who know they are not going to be living in their house for more than five to seven years.