7-23 Extendable Mortgage
The 7-23 extendable balloon mortgage is a fixed-rate mortgage having a term of seven years. While the loan term is seven years, the principal and interest payments are amortized over a 30 year period. The result being, lower monthly payments than would be the case if the loan was amortized over just the initial seven year term. At the end of the seven year balloon period, you may pay off the outstanding balance with a lump-sum (balloon) payment or, exercise the option to refinance at current market rates for the remaining term of 23 years.
The option to refinance is conditional. To be eligible for the refinance option, you must meet certain conditions (such as a history of timely payments or no second liens on your property). Conditions may vary but typically include payment by the borrower of closing costs and a lender fee, as well as no 30-day late payments in the previous 12 months and no other liens on your property.) You must occupy your property at the time of refinancing. You need not re-qualify for this loan when refinancing at the end of seven years as long as the new interest rate is not more than five percent above the current interest rate.
The refinance condition is not automatic -- you must exercise the option.
7-23 Extendable Mortgage Features:
- This mortgage is ideal if you plan to sell or refinance your home within seven years and want a low monthly payment during that time.
- The interest rate you pay on a balloon mortgage is usually lower than a comparable 30-year fixed-rate mortgage.
- The refinance option provides a "safety net" in case a planned relocation doesn't take place or economic conditions prevent you from moving to a larger home.