Amortization vs Balloon Payments

Amortization vs balloon payments is a question all about now versus later. Amortization refers to the repayment of the mortgage in question via equal payments over the life of the loan. The classic version is equal payments of 360 months. Balloon payment loans are all about procrastination. You get to make small monthly payments at the outset of the loan repayment period, but then the “balloon” element comes into play. After five to seven years, you suddenly must come up with the entire amount of the loan then due. If you refinance or can sell the home before then, it is not a problem. If you can’t, it is. When choosing a loan, the vast majority of people prefer the amortization version.