Amortized mortgage and balloon payments

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What is non amortized mortgage?

At the end is a ballon- a large final payment. Balloons are often used in a mortgage where the borrower pays the interest at the beginning and the principal at the end in one payment.

What is the most common mortgage ?

Fixed rate amortized, which means the interest rate never changes. Usually the monthly payments in amortized mortgages are the same each month

What is amortization?

Gradual repayment of mortgage debt in installments over a period of time. An amortized mortgage has monthly payments of principal and interest until the last payment when the loan balance is zero

Why would anyone get a balloon?

Usually because they plan to refinance or sell before the balloon payment is due. Not all non amortized mortgages have balloon payments.


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