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What is a Balloon Loan?
A Balloon Loan has lower debt payments than a fully amortized loan up until a lump sum payment at the end of a term.
Balloon loans have relatively low monthly payments due over their term and then a large lump sum payment for the remaining balance at the end. This can be advantageous if someone or a business knows they will be paid in a certain way that fits well with this schedule.
Other people and businesses may be planning to use a more flexible approach where the lump sum due at the end is rolled into a new financing schedule (such as a two-step mortgage), and this is usually done if there is a reset provision in the contract.
If there is no reset provision, the borrower will need to either be prepared to make the balloon payment or to refinance with a new loan before it comes time to make the balloon payment.
In either case there is a refinancing risk, meaning if things have changed in the market or with the client’s financial situation the refinanced arrangement may be worse for him or her than the original one was.
What Investment Choices Do I Have in My IRA?
IRA is a tax designation which can be placed on an account at various institutions that offer a list of investment options
What is a Home Equity Conversion Mortgage?
The main type of reverse mortgage that people get today is the Home Equity Conversion Mortgage, backed by the US...
What are Mortgage-Backed Securities?
Mortgage-backed securities (MBS) are products that bundle mortgages together and are traded for sale on the markets
What is an Active Index Fund?
Most index funds are known for using a completely passive strategy to track an index, but some take a more active...
What is Burn Rate?
Burn rate is a term for negative cash flow, or the rate at which a company burns through capital, especially a startup
What is Cash Available for Distribution?
Cash Available for Distribution is a term used in REITs for the balance of earnings left over after expenses have been paid
What is an FHA Loan?
The Federal Housing Administration runs the FHA loan program with the help of certified lending institutions
How fast should my portfolio grow?
In a perfect world, your portfolio would average 15-20% per year, forever, but this is really not feasible
How much time should I spend thinking about my investments?
Some investors become somewhat obsessive about their portfolio, and it can cause them to lose focus at their own job...
What does 'call option' mean?
If you own a Call Option, you have the right (not the obligation) to purchase a security at an agreed-upon price