|
A mortgage loan that requires the remaining principal balance be paid at a specific point
in time. For example, a loan may be amortized as if it would be paid over a thirty year
period, but requires that at the end of the tenth year the entire remaining balance
must be paid.
The final lump sum payment that is due at the termination of a balloon mortgage.
Broker has several meanings in different situations. Most Realtors are "agents" who
work under a "broker." Some agents are brokers as well, either working form
themselves or under another broker. In the mortgage industry, broker usually refers
to a company or individual that does not lend the money for the loans themselves, but
broker loans to larger lenders or investors. (See the Home Loan Library that discusses
the different types of lenders). As a normal definition, a broker is anyone who acts
as an agent, bringing two parties together for any type of transaction and earns a fee
for doing so.
|
Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary
period, usually one to three years. After that time and for the remainder of the term,
the borrower's payment is calculated at the note rate. In order to buy down the initial
rate for the temporary payment, a lump sum is paid and held in an account used to supplement
the borrower's monthly payment. These funds usually come from the seller (or some other
source) as a financial incentive to induce someone to buy their property. A "lender
funded buydown" is when the lender pays the initial lump sum. They can accomplish
this because the note rate on the loan (after the buydown adjustments) will be higher
than the current market rate. One reason for doing this is because the borrower may
get to "qualify" at the start rate and can qualify for a higher loan amount.
Another reason is that a borrower may expect his earnings to go up substantially in
the near future, but wants a lower payment right now.
|