Blowing Up Bills With Balloons
By Bob Schwartz, CRS,
GRI ©2005
www.brokerforyou.com All rights reserved.
If 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 evade situations that are
not financially possible. One of the terms that you
should know is "balloons". This can either aid 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 pick the right
loan.
Balloons are employed as means to decrease monthly
payments. It does this by consolidating a particular
portion of your loan each month. At the end of your
entire loan, you will pay the outstanding percentage
that is left. Usually, this will equal about half of the
loan that you have.
You can work with balloons to your advantage if you have
the correct finances in place. If you know that you will
have a significant 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 the future, then a balloon will most
likely not help you. Because you will need to pay a
large amount at the end, it can push 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
particular 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 expand to twice as much at the
end of the term. This can be a benefit or a
disadvantage, depending on your situation. By
understanding precisely how to seal the end of the
balloon, you will be able to choose the best financial
options for your situation.
ABOUT THE AUTHOR
Bob Schwartz, is a Certified Residential
Specialist, CA licensed real estate broker with
www.Brokerforyou.com. 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 e-mail at bob@brokerforyou.com
or visit his highly popular
San Diego real estate website
at:
http://www.brokerforyou.com
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