Additionally, when your clients refinance, they should hope that interest rates are the same or lower compared to when they first borrowed. Otherwise, they might want to go for a traditional amortizing loan, if available.
2. Pay it off
While this sounds naïve, your clients might want to simply pay off the home loan when it is due—if cash flow is a non-issue for them. Of course, this isn’t always possible. After all, a lack of money is the reason they borrowed in the first place. Plus, balloon payments can reach tens of thousands of dollars.
However, if your clients can generate the funds that they need prior to the balloon payment deadline, they would be in a position to pay it off.
3. Sell the property
If your clients want to get out of a balloon mortgage, they can sell the property. This option also works with whichever asset they bought with the loan (a vehicle, for instance). In this scenario, if they sell their asset or property, they can use the money to pay off the balloon mortgage in full.
This is under the assumption that the asset or property will generate enough money to pay the entire loan balance. Unfortunately, this isn’t always the case. For instance, before the housing crisis, many properties were worth considerably less than the homeowners owed.
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