California Dream House With A Balloon Loan

by Jessicapeterson - Date: 2007-03-27 - Word Count: 552 Share This!

Leaving Beverly Hills out of the picture, how about a town home in Hacienda Heights or Anaheim? California is a very "personal" state with a life of its own, on a different level from the rest of the country. Californian climate makes life worth while living and enjoying and so do conditions for purchasing a home.

The Ideal Place

California landscape is among the most beautiful in the country. Likewise, homes in California can not be "off-key" with the post-card scenery. It is true that prices are also different from the rest of the country, but to compensate that, our wise lenders have made it so much easier to obtain mortgage loans with which to purchase them.

A Typical Balloon Loan

Just to tune in, we'll say that a balloon mortgage is a two-step mortgage divided into two sections of 5 and 25 years or 7 and 23 years. The first part has a low monthly payment and after this period is finished, you must pay the remainder in full. In many cases there will be an option to refinance for the remaining period until the 30 years are covered, with higher installments and a slightly higher interest rate.

So, What Are The Expenses Of A Balloon Loan?

A balloon loan has an interest rate and fees, like any other loan throughout the country. What I mentioned as making things easier in California is in the way of interest rates to begin with. On average, you will find a difference of up to 1% on the rates, which is not chicken-feed. Apply this to the amount of the mortgage and you have a difference of a few thousand dollars a year.

A comfortable 2-bedroom home in Hacienda Heights will cost around $500,000 and if the loan is for 90% of that, then you will be saving 1% of $450,000, right? It's a nice sum of $4,500 a year. Enough to buy lovely Christmas presents for all the family as well as taking a short winter holiday.

Fees, Blessed Fees

Now, you're in for a surprise: There are no administration or application fees and no points. Fees like underwriting and processing are kept reasonably low, and credit report and document preparation are very low or even non-existent. That is all. This means that the APR will be very similar to the interest rate, having less than one tenth of a point difference.

Since 2003

The Federal Reserve rates have been low since 2003. Some experts say they are bound to stay as they are for quite some time to come. Others say that nobody really knows where they will go to and when.

My personal opinion is that they can't go very much lower than they are now, so probably it is a good moment for a 7/23 balloon mortgage, with the second step financed on a fixed rate normal mortgage loan basis. The savings on interest rates will amply compensate the fees at the time of changing over to the second step of the balloon.

Californians, Take Advantage

Typically, Californian homeownership is around 56%, according to a 2006 survey, against nearly 70% of the rest of the country. Wouldn't it be super to take advantage of the current low interest rates, before they have a chance to leave us behind?

Related Tags: balloon mortgage, e, california dream house, balloon loan, town home in hacienda heights, californian climate, california landscape, two-step mortgage

Jess Peterson writes financial articles for where she shares her knowledge about how to get money for a starting-up business, consolidating any kind of debt, repairing a home even with a bad credit history and more. Your Article Search Directory : Find in Articles

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