Real Estate Balloon Loan in key West

With a balloon loan, the buyer is expected to pay off the loan completely within a short period of time, usually in three, five, or seven years. In other words, this is a short-term loan. The interest rate can be fixed or variable, but in all cases the unpaid balance on the principal is due at the time specified. The borrower must either refinance or sell the home to pay off the loan.

To attract buyers, builders often offer balloon loans during periods of high-interest rates when home sales are sluggish. In most cases, the interest rate will be lower than prevailing home loan rates. However, if interest rates are high when full payment is due, refinancing may not be possible. The balloon will "burst," resulting in foreclosure and loss of the home.