Disclaimer - use at your own risk. I'm not a financial expert by any
means. Underconstruction - more stuff coming soon.
A long term loan such as a mortgage that has one large payment due upon
The balloon payment is the large amount due when the loan is matured
Advantages: low interest payments through the life of the loan
Disadvantages: large payment at the end of the loan.
Sometimes also known as a Balloon note or bullet loan.
Many people refinance the ballon payment.
Adjustable Rate Mortgage (ARM)
ARM is a mortgage with an interest rate that may change - usually with
the Treasury Bill rate or the prime rate. The purpose of the interest
rate adjustment is primarily to bring the interest rate on the mortgage in
line with market rates.
ARMs usually start out with better rates than fixed rate mortgages.
The current WSJ prime rate -
Effective December 16, 2008 the WSJ (Wall Street Journal) now determines the
Prime Rate by polling the 10 largest banks in the United States. When at
least 7 out of the top 10 banks have changed their Prime, the WSJ will
update its published Prime Rate.