Pros and Cons of Balloon Mortgage

A balloon mortgage is one that gives you favorably monthly payment terms for a relatively short term of a couple years or more followed up by a full loan payment due at year five or seven depending on the specific terms of the loan. The pro of a balloon mortgage is it lets you get into bigger properties than you would otherwise qualify for. If equity growth occurs, you can make a lot of money in a few years. If equity growth does not occur, your balloon mortgage can pop which is the major con. If you come up to the date when the full amount comes due and you don’t have any way to deal with it, you are in a horrific situation that will probably end in foreclosure or bankruptcy. In short, a very risky loan.