by Anna Assad
A 30/15 balloon mortgage can allow someone to buy a home.
A 30/15 balloon mortgage generally offers the features of a 30 year fixed-rate mortgage loan. The loan payment will remain stable for the life of the 30/15 mortgage, like a fixed-rate mortgage would, and unlike a mortgage with an adjustable rate. Adjustable-rate mortgages (ARMs) reset after a specified period of time. The reset can cause the loan payment to rise unexpectedly, as the interest rate on an ARM is adjusted to match inflation and current interest rates as determined by the financial market.
A 30/15 balloon mortgage loan is a fifteen year loan. The "30" represents the amortization period, which is calculated for 30 years, and the "15" stands for the length of the loan. Amortization is the process by which the balance of the loan decreases over the life of the mortgage.
A 30/15 loan is only 15 years, but the payments are based on a 30 year loan. However, this results in a large portion of the principal being due at the end of the 15 years. This portion is the "balloon" feature of the loan.
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