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Overview:
Although your monthly payment is calculated as if you will pay off the loan over 30
years, this loan requires that you completely pay your remaining balance (a significant
percentage of your original loan amount) in a single payment after 5 years. No, the lender
does not expect you to win the lottery. The idea of this loan is that you will sell your
home or refinance on or before your balloon payment date.
Is It For You?
This loan is the perfect program for temporarily relocated workers or others who
are certain they will not stay in their new home beyond the 5 year period. Unlike the 5
Year Adjustable, 5/1 Adjustable, and 5/25 Two-Step programs which also offer a fixed rate
for 5 years, the borrower often enjoys a lower interest rate for this program because he
is not obliging the lender to extend credit to him beyond the initial fixed period.
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