Balloon mortgages can be a smart financial instrument for savvy investors, but they are not without their risks. A balloon mortgage differs from a traditional mortgage in that it typically offers a low initial interest rate, usually for 5 to 7 years, at the end of which the remaining loan balance is due in full. Balloon mortgages can be effective for investors, rehabbers/flippers, and people who plan to own a property for a shorter period of time than the initial interest period.
Recently, I’ve had a few Vandy/Belmont parents choose balloon options when purchasing condos for their children during their stay on campus. The Motley Fool recently published an interesting article outlining the pros and cons of balloon financing. Read more here.
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