notwithstanding the foregoing schedule, i agree that unless sooner paid, i will have a final balloon payment in the amount of $323,654.15 due and payable on the new maturity date. PLS HELP ME TO UNDERSTAND THIS. WHAT DOES BALLOON PAYMENT IS?
A mortgage is a product that comes in many different forms to meet the needs of different borrowers.
A mortgage note with a balloon refers to a type of loan where you are not paying off the entire balance owed, but at the end of the loan term there remains a balance that your must pay.
Typically, an owner will re-finance at the end of the term - or sell and pay off the balance before the end of the term.
This type of loan may make sense for a borrower who plans to stay in a home for a short term or in an up market.
It makes less sense for a long term owner or in a down market.
It looks like you are excerpting from your mortgage or more likely your promissory note. A balloon payment is usually a payment of the remaining balance that comes due after a certain number of years. Essentially, this is a way for the lender to make you a shorter term loan. You really need to supply more information, but I suspect that the type of loan that you have is one where it was anticipated that you would ultimately re-finance. You need to read the mortgage/promissory note carefully to understand what events trigger the balloon payment. Often it is a certain time or after a certain number of months of payments. Likely, your TILA disclosures from the closing would spell out the point of time when the balloon payment becomes due. It is not clear, because you did not supply much factual background, whether you need an attorney or what the exigency is.
From reading the excerpt you provided, it seems as if the language was taken from a clause of a loan modification agreement that which you, or someone you know, was offered.
As correctly stated by the commentators here, that balloon payment is the final payment due at the end of your loan term (i.e. the maturity date). This balloon payment can be paid directly by you in the form of certified funds, or can be satisfied via a refinance and/or sale of the residence. Additionally, if the balloon is based upon a non-interest bearing principal deferment; you can divide the $323,654.15 by the remaining months of the loan and pay that additional amount on top of your regular monthly payments and then you will have no balloon payment at the maturity date.
For example, if the loan modification states that the new principal balance is $200,000.00, based on a thirty (30) year term at the fixed interest rate of 2.00%; your regular monthly Principal & Interest (P&I) payment would be $739.24. Then, if the balloon of $323,654.14 is a non-interest bearing principal deferment; if you were to pay an additional $899.04 per month on your your monthly payment (i.e. $739.24 + $899.04 = $1638.28 P&I), your loan would be paid in full at the maturity date and there would be no additional balloon payment.
Also, please realize that if this language was found in a loan modification agreement; there is a chance that there is additional language found in the same modification agreement that which may state something such as "In addition, $323,654.15 of the balloon payment is eligible for forgiveness. Provided I am not in default on my new payments such that the equivalent of three full monthly payments are due and unpaid on the last day of any month, on each of the first, second and third anniversaries, the Servicer shall reduce the Balloon payment of my Note in installments equal to one-third of the balloon payment".
Either way, It definitely seems prudent for you to contact a New York Attorney who specializes in loan modifications to provide you a free consultation to help you review and better understand the terms of the loan modification agreement. Also, please understand that most loan modification agreements are time sensitive and if you elect to accept the loan modification; you should definitely be cautious not to execute and return the documents after the return date stated on the documents.
I wish you the best and I hope this helped.
Is this part of a modification? If not, the attorneys above were clear in their answer to your question. If it is, then likely it has a different meaning. Generally on a modification, the balloon is non-interest bearing and given to make your home more affordable. It is essentially a portion of the loan that can be paid back dollar to dollar without any interest. While it is still a balloon, it is a balloon that most people would love to have. Because there is no pre-payment penalty, if it worries you, you can choose to pay it of every month by adding to your regular monthly payment an amount sufficient to pay it off in the years left on your loan.
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