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Loan Glossary

Balloon Mortgage:

A type of mortgage loan that is exactly like a traditional fixed rate mortgage except that it becomes 100% due after a specified amount of time has elapsed (usually five or seven years). When the loan matures, you must pay the loan off in cash (Balloon Payment) or refinance. The advantage of this type of loan is that the initial rate is usually lower than a normal fixed rate loan. The disadvantage of this type of loan is that you may have to refinance or pay off the loan if you do not sell the home by the time the loan matures.