Blowing Up Bills With BalloonsIf you aren't familiar with options for financing, it is never too late to learn about them. Knowing the different terms and having the ability to relate them to each other will help you to elude situations that are not financially possible. One of the terms that you should know is "balloons". This can either assist you financially, or cause you issues. Understanding the details of how balloons work and using them to your benefit will give you the ability to choose the right loan.
Balloons are used as ways to decrease monthly payments. It does this by consolidating a particular percentage of your loan each month. At the end of your entire loan, you will pay the additional percentage that is left. Normally, this will equal about fifty percent of the loan that you have.
You can work with balloons to your benefit if you have the correct finances in place. If you know that you will have a great amount of money at the end of your loan term, then having a balloon can help you to save now and create your credibility with financial investments later.
If you aren't certain of your financial status and what it will be in a few years, then a balloon will most likely not help you. Because you will need to pay a large amount at the end, it can lead you into debt and won't help you to make an investment on another house later on. In relation to this, if you are making a certain amount now but know that you will be making more later, then you can use a balloon in order to steady your financial conditions.
By using a balloon, you will be put into a situation where your mortgage will blow up to twice as much at the end of the term. This can be a benefit or a disadvantage, depending on your situation. By understanding exactly how to close the end of the balloon, you will be able to find the best financial options for your situation.
ABOUT THE AUTHOR Bob Schwartz, is a Certified Residential Specialist, and a CA licensed San Diego real estate broker with. Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers. You can contact Bob via his highly popular San Diego real estate website.
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