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Unformatted text preview: depending on the agreement. This is why this type of loan is mostly used in the commercial real estate financing. It allows for low monthly payments which helps businesses with cash flow. At the end of the term, for a balloon loan, there is still the matter of the remaining principal loan balance. The lending institution usually requires that the loan balance, or balloon amount, be paid in full. This can be accomplished by refinancing. A lot of lenders include additional options such as a conversion feature at the end of the term. For instance, a balloon mortgage at maturity can be converted to a 30 year fixed loan. Of course this type of option comes with predetermined costs. Either way, if you are dealing with or are interested in a balloon mortgage, you should expect lower monthly payments, with a big payment due at maturity....
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This note was uploaded on 03/06/2010 for the course ART 121 taught by Professor Mack during the Spring '10 term at Academy of Design Tampa.
- Spring '10