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Loan Comparison: Interest Only Home Equity Loans Versus Balloon 2nd Mortgage
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What is an interest only home equity loan? This is a loan where the principal borrowed is not paid back each month only the interest is repaid. The principal borrowed may be due in 10, 15 or 20 years. A borrower may decrease the amount of principal due in the future by making payments on the principal.


Interest only mortgages may be adjustable rate mortgages (ARM) or fixed rate mortgages. A fixed rate mortgage will have a set payment for the period of the loan. ARM mortgages will have a fixed rate initially for a six-month period Cheap Pedro Chirivella Jersey , and then the rate will increase or decrease based on an index, prime rate or five-year treasury rate.


A balloon second mortgage is a short-term mortgage with a fixed rate of interest. Balloon mortgages require repayment of principal and interest. The monthly payments of principal are not based on the five-year term of the mortgage but a longer amortization period of 30 years. Balloon mortgages must be refinanced every five years at the expense of the borrower and subject to any dramatic increase in interest rates.


One of the advantages of the balloon second mortgage is the lower monthly payments could yield additional funds for debt consolidation and home improvements. With lower monthly payments the homeowner has more money to budget towards other expenses.


If the balloon mortgage is repayable in five years and the ARM is a 520 loan Cheap Ovie Ejaria Jersey , both loans must be refinanced in five years. The balloon second mortgage must be refinanced with a new second mortgage, a line of credit or a home equity line at the expense of the borrower. ARM mortgage rates reset using a mechanical rate adjustment procedure set in the original contract and have a cap on the amount the rate of interest may be increased.


Currently the rates on balloon mortgages are generally lower then the rates on ARM mortgages. If one were sure that rates would be lower in five years Cheap Nathaniel Clyne Jersey , the balloon mortgage would be a wise choice. If one is unsure of future interest rates the security of knowing the maximum rate the interest can be five years in the future would be worth the slightly higher cost of the ARM mortgage.


Both of these second mortgage loans can co behind a negative amortization loan in 1st position, as long as the broker or lender allows the deferred interest loan. Check with your home equity lenders to make sure that they will allow you to get a home line of credit or second mortgage behind a payment option ARM.


If we had a crystal ball to look into the future the comparison would be simple. In a scenario with 15% interest rates the ARM would be the wise choice while in a scenario with 5% interest rates the balloon mortgage would be the wise choice. Unfortunately the uncertainty of the future of interest rates makes it clear there is some risk involved in making this decision.


Louisville is one of the largest cities of United States in state of Kentucky. The living standard of people in Louisville is very high with easy of every facility. It has a good connectivity to many locations and parts of United States. If you do not own a property in Louisville Cheap Mohamed Salah Jersey , you can plan to buy a house as Louisville is the true place to live. You can decide whether you want to use your house for living purpose or commercial purpose.


Louisville Ky Real Estate has become very popular because of high demand of residential and commercial property. Property buyers are coming to Louisville because of various facilities available in this city and also because of easy options for good living. All the residential areas of Louisville are very lively and have awesome environment and natural beauty. The neighbourhood is very safe for children. In fact, Louisville is very popular for its houses. Louisville houses are very affordable Cheap Marko Grujic Jersey , economical and within the reach of even middle-class people.


People living in Louisville experience a life full of fun and enjoyment. The city witnesses a large number of tourists every year. Buying a real estate property here in Louisville is like a dream come true. Louisville real estate is in full demand because this city is in the prime locality of Ohio River. This city witnesses the Kentucky Derby which is a very famous race of the Triple Crown of the Thoroughbred racing. As the city lies in South Indiana, it is also known as Kentuckiana. The river is a border between Kentucky and Indiana. The culture in Louisville is a mixed of Midwestern and southern.


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