Posted on: 22nd Jun, 2011 01:45 am
Hi there… thanks for this wonderful forum! I have a mortgage and I'm bit confused what a balloon rider is all about? Is it the something like a balloon mortgage? Also, please let me know how balloon payments affect interest on a loan?
Hi Sharon,
As far as I know, a balloon rider is usually an addition to the mortgage note which describes the terms of the loan. The terms should match the terms on the application as signed at the beginning of the loan process. The rider will actually point to fact that the loan has a balloon feature. Also, you should note that the rider will be very specific about the date when this lump sum amount is due.
It is true that balloon payments on mortgage loans will affect interest rates. You should note that rate on balloon loans as mentioned in mortgage doc is typically lower than the note rate on loans without a balloon payment. A loan with a balloon payment will have higher APR than a similar loan without a balloon payment.
Thanks,
Jerry
As far as I know, a balloon rider is usually an addition to the mortgage note which describes the terms of the loan. The terms should match the terms on the application as signed at the beginning of the loan process. The rider will actually point to fact that the loan has a balloon feature. Also, you should note that the rider will be very specific about the date when this lump sum amount is due.
It is true that balloon payments on mortgage loans will affect interest rates. You should note that rate on balloon loans as mentioned in mortgage doc is typically lower than the note rate on loans without a balloon payment. A loan with a balloon payment will have higher APR than a similar loan without a balloon payment.
Thanks,
Jerry
Any type of rider is an attachment to the mortgage deed that is being recorded, be it in a city, town, county, state registry (Land Records in Connecticut). It is, as Jerry noted, an effort to describe something additional - in this case, a balloon payment requirement - that is not found in the body of the deed. It is not related to the promissory note.
