Balloon Mortgage
|
Adjustable-Rate Mortgage
|
|
Interest rate is fixed throughout the life of the loan (5 years, 7 years, 10 years or 15 years).
|
Interest rate varies throughout the life of the loan.
|
|
You’ll probably get a significantly lower interest rate than a typical fixed-rate loan, which means a lower monthly payment.
|
Low, fixed rate for the initial introductory loan period, which is usually very competitive – less than what fixed-rate mortgages can offer. |
| The interest rate remains fixed for the life of the loan. Therefore, you’ll be making the same payment each month, offering you a sense of predictability. |
After the first phase is complete (e.g., 3 years, 5 years, 7 years, or 10 years), you continue paying off your loan at a rate that adjusts periodically (typically on an annual basis). With a 5-year ARM, for example, your rate is locked in for five years before it can change.
|
|
A balloon mortgage is structured as a typical 30-year principal- and interest-payment loan until maturity. At the end of the loan term, a lump-sum payment, equal to the remaining balance of what you owe, is due.
First National Bank will notify you well in advance of your loan’s maturity so you can refinance the remaining balance if necessary.
|
ARMs require borrowers to plan for when the interest rate starts changing and monthly payments potentially increase. Even with the best of plans, what happens if you are unable to sell your home or refinance when the first phase ends. Your payments could become unaffordable, and even worse, cause you to lose your home. |
|
ARMs require borrowers to plan for when the interest rate starts changing and monthly payments potentially increase. Even with the best of plans, what happens if you are unable to sell your home or refinance when the first phase ends. Your payments could become unaffordable, and even worse, cause you to lose your home.
|
An ARM may be a good idea if your life is likely to change in the next few years – for instance, you plan to move or sell your house. You can enjoy the ARM’s fixed-rate period and sell before it ends, and the less-predictable adjustable phase starts. |