Balloon or Reset Mortgages
5-year and 7-year balloon/reset mortgages are types of home loans that are usually based on a 30-year payment plan; however, the borrower is only given either 5 years or 7-years to repay the mortgage. For this reason, this is intended for financially savvy borrowers who can then choose to extend the repayment term when the end of term is reached. Borrowers who usually don’t plan to stay in their home longer than five or seven years can also benefit from 5-year and 7-year balloon/reset mortgages.
5-year and 7-year balloon/reset mortgages also contain unique features that enhance their functionality. These mortgages allow temporary subsidy buy-downs and usually allow for secondary financing. Although the latter may require additional documentary requirements.
Due to the flexible nature of 5-year and 7-year balloon/reset mortgages, they can be a powerful borrowing tool. Borrowers can enjoy the security of a fixed-rate mortgage, with lower initial rates, which can enhance purchasing power.
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