Monthly Payment Size

• The amount of your monthly payments in a 30/15 balloon mortgage will be figured as if you were going to take 30 years to pay off the loan. This means smaller monthly payments than if you were try to pay the entire loan off in 15 years.
  
  

Benefits

• Taking out a 30/15 mortgage locks in your interest rate for 15 years, with lower monthly payments than a traditional 15-year mortgage. After 15 years, the remaining balance becomes due in a lump-sum payment, called the balloon. At this point, most people elect to refinance their mortgages at the current interest rates.
  
  

Warnings

• Before signing the mortgage papers, talk to your lender about refinancing costs that you will likely incur when the balloon payment comes due after 15 years. Note, too, that you cannot predict what mortgage rates will be 15 years from the time you take out the initial loan.