Balloon Mortgage

[invest]

What does Balloon Mortgage means? How does it work? I've read that you can use Balloon Mortgage if you have poor credit but what does it mean?

thanks

[trent]

A balloon mortgage is a type of mortgage that still has a balance due on maturity date. The last payment (balloon payment) of a balloon mortgage is usually substantial in size. The balloon mortgage doesn't amortize fully over the term of the mortgage, instead using a amortization schedule of longer term mortgage. For example if you get a balloon mortgage of $100,000 for 10 years and you amortize it using a 25 years amortization schedule instead, you'll end up paying less monthly (compared to if you amortized the mortgage over 10 years), however a big chunk of your mortgage principal will be due back on the maturity date.

[Canadian]

I know that you can get a balloon mortgage down in US, but I'm not sure about Canada. Does anybody know if any Canadian banks offer balloon mortgages?

[trent]

Originally Posted by Canadian

I know that you can get a balloon mortgage down in US, but I'm not sure about Canada. Does anybody know if any Canadian banks offer balloon mortgages?

Yes, you can get a balloon mortgage in Canada, but in general they are very small percentage from the total number of Canadian mortgages.

[invest]

Thanks! Maybe because it is not that popular in Canada I've never heard of it...

[investor]

Originally Posted by trent

A balloon mortgage is a type of mortgage that still has a balance due on maturity date. ....


however a big chunk of your mortgage principal will be due back on the maturity date.

Don't you think someone who got a balloon mortgage will be more likely to default on the loan?